Housing exuberance may be hitting peak

Housing clearance rates dropped below 80 per cent for the first time this year, with the dip a sign the market could be cooling.

Housing clearance rates have dropped slightly. Picture: News Regional Media

Housing clearance rates dropped below 80 per cent for the first time this year, with the dip over the weekend a sign the market could be cooling off.

Property researcher CoreLogic reported that volumes and clearance rates were both down on last week’s figures, with 2041 capital city homes going under the hammer collecting a 78.5 per cent clearance rate.

Sydney recorded 82.1 per cent of houses sold across 777 auctions, which was a slight drop from an 84.8 per cent initial clearance rate the week prior. Melbourne auction volumes fell with 770 properties sold at a 76.1 per cent rate.

Canberra was the standout, recording a preliminary clearance rate of 97.7 per cent across 55 properties. Brisbane also remains strong, recording a preliminary figure of 76.2 per cent.

Core Logic head of research Eliza Owen said recent housing indicators suggest the market’s bubble may be starting to burst.

“The kind of growth rate in dwelling values seen over March, where values increased 2.8 per cent in a single month, is not the kind of growth that can be sustained,” she said.

“Property prices reach a point where growth rates naturally start to slow, off the back of affordability constraints, and a reduced willingness to pay when property becomes more expensive. There’s also evidence that stock levels are starting to increase, with new listings added to the market (both auction and private treaty) in the 28 days to April 18 up 0.4 per cent on the previous period, and up 10.9 per cent on the five year average.”

While the figures show a slight softening of the market, clearance rates across capital cities remain strong compared with last year when auctions were pummelled by restrictions and a pandemic-related economic slump.

For example, clearance rates last year were down dramatically with Sydney recording 50.9 per cent in the same week and Melbourne auctions just 27.9 per cent.

The nation’s total clearance rate was just 41.1 per cent.

“So while growth rates in property prices are slowing, they are still positive,” Ms Owen said.

“This is a high result relative to historic average, but does suggest a bit of a slowdown in momentum compared to the month of March, where the final clearance rate averaged 81 per cent.”

CoreLogic research director Tim Lawless said the record breaking capital gains across Australian housing markets are likely to taper over the next few months.

“There are some early signs the exuberance in the housing market may be peaking,” he said.

“This isn’t to say housing values are about to reverse, a more likely scenario is the housing market is moving through a peak rate of growth and the pace of capital gains will gradually taper over the next few months.”