Big capitals hit by falling auction clearances as housing market begins to cool

More properties went under the hammer over the weekend but clearance rates are falling off as demand can’t keep up.

Auctioneer Michael Garofolo brings down the gavel on a Sydney property on Saturday. Picture: Julian Andrews

Sydney and Melbourne auctions disappointed in what had been billed as a super weekend with the hopes of big sales volumes hit by a combination of bad weather and worries about rising interest rates and regulatory intervention.

The surge in the number of homes listed for sale has outstripped demand, which remains elevated, leaving some properties languishing on the market and potentially providing buyers some relief from price hikes.

Capital cities across Australia had their busiest auction weeks since CoreLogic started keeping records in 2008 as 4261 homes went under the hammer, marking the first time the volume of capital city auctions has topped 4000.

Research house CoreLogic said that demand hasn’t quite kept pace with the surge in auctions held, with the preliminary clearance rate continuing the softening trend evident since early October, slipping further this week, with 71.4 per cent of the 3471 results collected so far selling before, at or after auction.

This risks falling into the high 60 per cent range once figures are finalised as confidence is rattled by the emergence of a new coronavirus variant at the same time a large amount of stock is on the market.

CoreLogic last week reported a preliminary clearance rate of 74.5 per cent, later revised to 70.3 per cent, while this time last year 70.6 per cent of auctions were successful.

Melbourne recorded its busiest week since late March but was struck by its lowest preliminary clearance rate since the middle of September. This week 1891 auctions were held, up 14.1 per cent from the week prior when 1657 homes were taken to auction.

With 1613 results collected so far, Melbourne recorded a preliminary clearance rate of 68.5 per cent, below last week’s preliminary clearance rate of 72.7 per cent, that fell to 68.6 per cent at final figures.

This time last year 69.3 per cent of the 909 auctions held were successful as the city came out of a lockdown. Despite the increase in volumes, Melbourne’s withdrawal rate has remained steady at 9.8 per cent.

Sydney missed predictions that it would break its all-time record for home sales with CoreLogic saying it disappointed this week, with 5 per cent of scheduled actions postponed, likely due to the weather.

With 1577 homes taken to auction across the city, this week was Sydney’s second busiest on record and the busiest since late November 2014, during the last residential property boom.

Last week 1352 homes went to auction while this time last year 886 auctions were held. With 1281 results collected so far, Sydney crashed to its lowest reading over the year to date, reporting a preliminary clearance rate of 71.4 per cent.

The preliminary clearance rate was 73.4 per cent last week, which was revised down to 68.7 per cent at final figures, while 72.5 per cent of auctions held this time last year were successful.

REA Group senior economist Eleanor Creagh said the market was reaching a point where interest rates were not going to go any lower and prices had moved significantly higher.

She argued the impact of lower rates was fading and analysts have raised the spectre of macroprudential tightening, which pointed to a slowing in market activity and price growth.

“I think we’re reaching that period now and where that real kind of FOMO effect is coming out,” Ms Creagh said. “But I don’t think we’re near to a buyers’ market.”

Instead price growth has begun to slow and there will be more dispersion of results, with buyers only chasing properties where a price premium is justified.

REA is seeing elevated demand on its platform but vendors have reacted to the threat of slower prices and forecasts of price falls in 2023 by rushing to market.

“The pace at which demand is increasing is moderating and the pace at which supply is increasing is increasing. So that’s just where you’re getting that balance coming into the market,” Ms Creagh said.

CoreLogic said that in smaller capitals, Canberra’s preliminary clearance rate rose from 85.7 per cent last week to 88.2 per cent this week despite reporting its highest ever volumes. Adelaide also recorded its busiest ever week but saw its preliminary clearance rate dip to 78.7 per cent. Brisbane reported a preliminary clearance rate of 74.5 per cent, while 60 per cent auctions held in Perth were successful.