The auction market has swung into gear earlier than usual as sellers look to get out before the boom eases, with rising rates and the lack of affordability expected to dampen buyer appetite as the year progresses.
Of the 448 homes listed nationally for auction over the past week, 68.6 per cent sold, on CoreLogic’s preliminary figures. That listings tally jumped more than 80 per cent for the comparable weekend last year, and was well up on the corresponding period preceding the pandemic’s arrival in Australia in early 2020.
The early and strong surge in January auctions carries into the new year the momentum of last year, when strong conditions encouraged sellers to realise their gains and pushed house prices 24.5 per cent nationally, according to CoreLogic research director Tim Lawless.
“Selling conditions are still strong, but clearly they are not as strong as they were before when we started to see this surge in new listings coming on the market,” Mr Lawless said on Sunday.
“There is more stock to choose from: buyers have more choice, less urgency. There are other things playing on confidence as well – the move toward higher interest rates and the uncertainty related to omicron.
“A lot of homeowners would be motivated to sell when they’ve seen a lot of capital growth in their property, and also they know the market will probably slow further through the year.
“We’re probably seeing some rebalancing between buyers and sellers. It’s great news for buyers, they’ve finally had a little bit of the fade of this FOMO that’s been going on for so long and maybe more opportunity to deliberate on their purchases and negotiate.”
Buyer interest wanes ahead of rate rise
In an indication that clearance rates are normalising, in Melbourne, the busiest market in the past week, 64 per cent of homes sold at auction, with 144 listed for the block, on CoreLogic’s preliminary figures. The rate is roughly on par with December’s clearance rates.
In Sydney, 79 homes were taken to auction in the past week, with a preliminary clearance rate of 58.3 per cent, down slightly from the December average of 60.4 per cent.
As the hot markets of Sydney and, to a lesser extent, Melbourne ease, it is the smaller capital cities where the action is, driven by the tailwinds of affordability and demographic shift.
Adelaide recorded the highest preliminary auction clearance rate at 78 per cent, with 84 auction listings, followed by Canberra at 76.2 per cent, with 27 listings, and Brisbane at 76.1 per cent, with 99 listings.
Making hay while the sun shines was the sale by a deceased estate of a two-bedroom split-level residence at the Phoenix Apartments in Kensington, in Sydney’s inner east.
The apartment at 414/14-18 Darling Street sold for $1.55 million, around $100,000 above its reserve and before its scheduled auction, according to selling agent Alexander Phillips of PPD Real Estate.
“It gives a good indication of where the market is at the moment,” Mr Phillips said, noting that with lockdowns over but overseas travel yet to recover there are more buyers around.
“Every week from now on more stock will come on, and then you’ll find the market will probably come off. It’s supply and demand and they, the vendors, are in the box seat in January.”
Meanwhile, the first leg of a 146-property portfolio auction, dubbed The Event, run by Ray White Surfers Paradise and held annually on the Gold Coast, chalked up a 95 per cent clearance rate.
“These properties are selling well above the reserve, which shows how strong the belief in the Gold Coast is,” said auctioneer Andrew Bell, who is chief executive of Ray White Surfers Paradise.
January’s early surge in auction listings comes as nervousness about rising rates begins to eat into global financial markets. Last Friday, the Australian sharemarket fell to its biggest weekly loss since 2020, as investors dug ahead the rate hikes anticipated to be imposed in an effort to control inflation.
AMP Capital’s chief economist Shane Oliver does not expect the Reserve Bank of Australia to begin lifting rates until August, but fixed rate mortgages are already moving higher.
“Buyer interest is still there, but it is waning because interest rates have gone up and affordability is now poor,” he told The Australian Financial Review.
“We are getting closer and closer to interest rate hikes by the RBA. In the meantime, we’re seeing further increases in bond yields which will maintain upwards pressure on fixed rates.
“That doesn’t impact existing borrowers because they are all locked in. But it impacts new borrowers, and they are the ones who drive house prices.
“The mortgage rate environment is turning against the property market. We’re going to see increases in variable rates later this year, affordability has deteriorated dramatically and the impact of incentives is waning. It’s just become a lot tougher.”
Article Source: www.afr.com