Auction clearance rates have collapsed in three of Australia’s largest markets, after successive interest rate increases from the Reserve Bank. Listings were also down in Sydney, Melbourne and Adelaide.
Clearance rates in Sydney were down to 66.3 percent, according to Australian Property Monitors a fall on the previous weekend’s 69.4 per cent. Total auctions higher than this time last year, however the 506 listings in Sydney were lower than the previous weekend.
Melbourne showed a similar trend, with 836 auctions compared to 861 the previous weekend, with clearance rates also lower at 67.2 percent compared with 74.9 percent previously.
Australian Property Monitors said Adelaide was also down, falling slightly to 54.3 percent, down 1.3 percent, with auction listings down from 67 to 54.
This decline in auction clearance rates and listing numbers is seen as evidence that successive interest rate increased by the RBA are finally filtering through to actual purchase decisions in the market.
The reduction in house listings for auction lags as an indicator more so than clearance rates, with sellers planning in advance to sell at auction and committing to an auction date more so than buyers, who after this month’s interest rate increase were able to adjust their spending decisions more quickly, with some opting to drop out of the housing market and instead choosing to stay where they are, or move into the rental market.
Matthew Bell, economist at Australian Property Monitors, says the market is cooling, but he expects it to remain relatively strong at the lower end of the market until interest rates hit a tipping point above 7.5 percent.
“I don’t think we’ll see price falls. I think we’ll see cooling and moderated growth, but those interest rate rises aren’t going to cause the market to fall. When we hit that 7.5-8 percent variable mortgage rate, that’s traditionally when confidence takes a hit.” he said.
Catherine Cashmore, from JPP Buyer Advocates, cautioned against reading too much into the reduced clearance rates, however believed some, particularly first home buyers would be deterred by the RBA’s latest interest rate increase.
“These are the groups who are on stricter budgets and for whom rate rises come into play,” she said to The Herald Sun.
Ms Cashmore expects interest rates to continue to increase, possibly as high as 9 percent.
“Most buyers understand … interest rates will keep rising to normal levels, and they have taken that into account. It wouldn’t surprise me if they rose to 9 percent,” Ms Cashmore said.