Auction cool-down continues with spring around the corner

According to Cotality’s Market Indicator Summary for the week ending 23 August, the preliminary clearance rate fell to 53.2 per cent from the prior 12-week high of 56.5 per cent.

However, the data showed that auction volumes increased to 1,406, more than the previous figure of 1,276 homes.

Cotality economist, Annabelle Mezieres, said the improvement from two weeks ago could simply be weekly volatility, rather than a prolonged or sustained change in market conditions.

She said it was clear the auction market was still affected by stretched affordability and constrained borrowing capacity, with an increase in total listings causing a buyers’ market.

“For the most part, the lead-up to spring season is looking a little different than last year, given current home values are falling and macro-economic conditions aren’t the same as this time last year,” she told REB.

“We’d still expect the usual seasonal rise in listings, but on current trends it’s likely to be a relatively subdued auction season this year, especially given what’s happening in the economy.”

Mezieres said buyers remained fearful of falling into negative equity or paying more on their mortgage if values kept declining.

“Secondly, people are inclined to sit on their hands and wait to see if economic conditions improve, especially after the RBA chose to leave rates unchanged at its last meeting,” she said.

According to Mezieres, vendor sentiment was also looking different, with auction volumes down in recent weeks as sellers favoured private treaty or opted to wait out the downturn instead.

Sydney was the only capital where the preliminary clearance rate rose, increasing to 56.6 per cent from 55.6 per cent the week before.

Mezieres said Sydney’s result was interesting last week, but the slight rise may have been partly due to a high number of homes selling before auction.

“That said, the city’s clearance rate has now stayed below 60 per cent for the 16th consecutive week, and its auction volumes remain lower than last year, which suggests the broader market is still subdued.”

On the other hand, Melbourne’s early clearance rate fell to 55.4 per cent, its weakest in four weeks, but the capital held the most auctions, with 600 homes going under the hammer, up 2.0 per cent.

In Brisbane, 40.4 per cent of homes successfully sold from 153 auctions.

Of the 92 homes taken to auction in Adelaide, 54.8 per cent were successful on early results.

Meanwhile, Canberra held 67 auctions, seeing a preliminary clearance rate of 41.4 per cent, a decline from 60 per cent the previous week.

In Perth, only 11 auctions were held, with just two resulting in a sale so far, while the single auction scheduled in Tasmania was withdrawn.

Across the combined capital cities, 221 homes were withdrawn, and 256 were passed in, meaning around 477 auctions did not result in a sale on the day.

Mezieres said that more properties being passed in than withdrawn suggested the gap between vendors’ and buyers’ pricing expectations was still substantial.

“This points to cautious vendors, and as a result we expect many of these homes will likely sell in the days after auction through private treaty,” she said.

“A high pass-in rate suggests that buyers and vendors can’t agree on price, which helps explain why the preliminary headline clearance rate is usually in the low 50s.”