Auction clearance rates have plummeted to their lowest since early 2020, as cautious buyers retreat and sellers increasingly reconsider their plans amid weakening conditions.
The preliminary auction clearance rate for the combined capitals fell under 50 per cent for the first time since early in the pandemic, in the week ending 21 June.
Cotality’s Property Market Indicator Summary showed that, across the capital cities, 47.4 per cent of properties returned a successful early result, the lowest reading since the final week of April 2020.
Meanwhile, 23.6 per cent of scheduled auctions were withdrawn, with nearly half, 48 per cent, sold prior to going under the hammer.
Total volumes also remained low, with just 1,869 capital city homes going to auction, a 10.8 per cent drop on the previous week and 6.7 per cent fewer than the same week a year ago.
Cotality’s Research Director, Tim Lawless, said challenges around affordability, serviceability, and higher interest rates had steadily reduced buyer demand.
“Confidence is in deeply pessimistic territory and the budget announcements around housing taxation policy have likely seen a pull back in investor activity in the market,” he told REB
As a result of cooling conditions and rising stock levels, he said purchasers now had less urgency and more choice, with the gap between buyer and seller expectations widening.
“For prospective vendors, we may see more choosing to hold off on their selling plans until market conditions start to improve,” he said.
Sydney’s preliminary clearance rate fell to 47.4 per cent from 52.8 per cent, its lowest early result since the week ending 19 April 2020.
Melbourne also saw a lower result than the previous week, with the preliminary clearance rate falling to 50.6 per cent from 57.6 per cent, marking its weakest early result since September 2021.
Lawless said the trend had historically shown a close relationship between lower clearance rates and dwelling values, especially in “auction-centric” markets like Melbourne and Sydney.
“Clearance rates holding around the 50 per cent range or lower would generally imply some downward pressure on home values,” he said.
In Brisbane, there was also a significant softening, recording a preliminary clearance rate of just 33.3 per cent from 42 per cent.
The data showed Adelaide’s auction market also lost momentum, with the early clearance rate falling to 40.0 per cent, its weakest since May 2020.
The ACT was one of the only markets to record an improvement in clearance rates last week, rising by 1.4 percentage points to 47.1 per cent.
In Perth, just 16 auctions were held, with 40.0 per cent resulting in a successful sale, while Tasmania had no scheduled auctions.
Next week, Cotality estimated lower auction volumes, with 910 homes to go under the hammer, down 6.7 per cent from two weeks ago and 1.8 per cent down from last year.
In the coming months, Lawless said there were likely to be fewer vendors opting to sell their home by auction, refusing to test the market until selling conditions improved.
“Clearance rates are likely to remain low over the coming months, as we aren’t expecting any catalyst to become present that might turn housing conditions around,” he said.
“Interest rates aren’t likely to come down any time soon, although we might start to see confidence lifting from deeply pessimistic levels if the conflict in the Middle East continues to stabilise,” Lawless concluded.
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