Auction Markets Still Hot Despite Flood Of Listings
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Auction Markets Still Hot Despite Flood Of Listings

A sharp rise in auctions had little effect on clearance rates.

By Terry Christodoulou
Mon, May 3, 2021 10:00amGrey Clock < 1 min

This past Saturday, May 1, saw the home auction markets resume at full pace with a total of 2287 auctions reported in the nation’s auction capitals, an increase of 33.9% over the previous weekend and the highest offering since the Super Saturday of March 27.

Despite the surge in auctions, the average clearance rate held firm at 83.3%, just below the 83.4 of the previous weekend.

The Sydney auction market continues what is the strongest start to the year for the local housing market since 1989.

Reporting a clearance rate of 84.6%, Sydney fell just shy of the 85.1% recorded the previous weekend, and well above the COVID-impacted 52.4% recorded this time last year.

While Sydney’s Saturday result was the second consecutive weekend of marginally lower clearance rates, it was achieved despite a 39% increase in the number of homes offered for sale.

A total of 934 auctions were reported on Saturday, compared to the previous weekends 672, while the median price of $ 1,590,500 for houses sold at auction at the weekend was 9.7% higher than the $1,449,900 reported over the previous Saturday.

Melbourne fared similarly with the auction market recording its highest clearance rate in a month – a figure of 80.1% – up on last week’s 79.0% and well ahead of the COVID-impacted 34.7% of the same weekend last year.

The strong result comes as 1084 homes were listed for auction on Saturday, well above the 835 of the previous weekend and the 157 auctioned over the same weekend last year.

Melbourne recorded a median price of $1,001,000 for houses sold at auction on the weekend which was 2.6% higher than the $975,000 recorded over the previous weekend.

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Mortgage holders should brace themselves for more pain as the Reserve Bank of Australia board prepares to meet this afternoon for the first time this year.

Most economists and the major banks are predicting a rise of 25 basis points will be announced, although the Commonwealth Bank suggested yesterday that the RBA may take the unusual step of a 40 basis point rise to bring the interest rate up to a more conventional 3.5 percent. This could present the RBA with the chance to put further rate rises on hold for the next few months as it assesses the impact of tightening monetary policy on the economy.

The decision by the RBA board to make consecutive rate rises since April last year is an attempt to wrestle inflation down to a more manageable 3 or 4 percent. The Australian Bureau of Statistics reports that the inflation rate rose to 7.8 percent over the 2022 December quarter, the highest it has been since 1990, reflected in higher prices for food, fuel and construction.

Higher interest rates have coincided with falling home values, which Ray White chief economist Nerida Conisbee says are down 6.1 percent in capital cities since peaking in March 2022. The pain has been greatest in Sydney, where prices have dropped 10.8 percent since February last year. Melbourne and Canberra recorded similar, albeit smaller falls, while capitals like Adelaide, which saw property prices fall 1.8 percent, are less affected.

Although prices may continue to decline, Ms Conisbee (below) said there are signs the pace is slowing and that inflation has peaked.

“December inflation came in at 7.8 per cent with construction, travel and electricity costs being the biggest drivers. It is likely that we are now at peak,” Ms Conisbee said. 

“Many of the drivers of high prices are starting to be resolved. Shipping costs are now down almost 90 per cent from their October 2021 peak (as measured by the Baltic Dry Index), while crude oil prices have almost halved from March 2022. China is back open and international migration has started up again. 

“Even construction costs look like they are close to plateau. Importantly, US inflation has pulled back from its peak of 9.1 per cent in June to 6.5 per cent in December, with many of the drivers of inflation in this country similar to Australia.”

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