House prices to fall as clearance rates decline

Australian house prices are likely to head down on the back of weakening auction clearance rates, according to leading analyst SQM Research.

Man using laptop searching for real estate or new house on the internet with for sale sign on red house

Australian house prices are likely to head down on the back of weakening auction clearance rates, according to leading analyst SQM Research, which has warned the market will struggle to return to pre-virus heights.

Auction clearances are a closely watched barometer of the residential property market, even as some activity shifts to private sales, as they are correlated with home values.

The Queen’s Birthday weekend saw limited auction volumes although there has been some recovery as restrictions on home inspections and sales lifted.

The housing debate also moved on from the pitched battle over whether prices will crash to questions about the impact of the Reserve Bank’s interest rate cuts, the course of an unpredictable economic recovery and the short-term impact of the Morrison ­government’s home-building package.

Research house CoreLogic said that over the past week, 694 capital city homes were scheduled for auction, with preliminary results returning a 59.8 per cent clearance rate. The previous week saw 856 homes scheduled for auction and a final clearance rate of 61.3 per cent, the third week in a row where the final clearance rate held above 60 per cent.

A year ago, there were 805 homes taken to auction and a 48.3 per cent clearance rate, CoreLogic said.

At that time the market was beginning its climb after the re-election of the Morrison ­government.

The major capitals are at similar levels, according to CoreLogic, with Sydney’s preliminary auction clearance rate at 62.2 per cent in 388 auctions, while Melbourne had a preliminary auction clearance rate of 64.1 per cent in 189 auctions.

CoreLogic Asia-Pacific head of research Tim Lawless said auctions had experienced a “pretty clear” bounce-back, but at a rate well below the pre-crisis levels when clearance rates hit 80 per cent. He said a clearance rate in the low 60 per cents indicated a stable market.

SQM Research managing director Louis Christopher said the residential market was topping out with three weekends of clearance rates trending lower.