Auction clearance rates have surpassed the 50 percent mark following a significant decline to levels not witnessed in over six years. However, experts are advising caution, suggesting that the increase might be more reflective of a decrease in the volume of properties going to auction rather than signaling a full market recovery.
The preliminary auction clearance rate across Australia’s major cities reached 54.8 percent last week. This marks a five-point rise from the week before and represents the highest rate recorded in the past seven weeks, as reported by property analysis firm Cotality.
This development follows a significant dip in late June, when a mere 47.4 percent of nearly 1,900 homes taken to auction found buyers, marking the weakest performance since April 2020 amid the pandemic’s disruption of the real estate market.
Currently, auction volumes have dropped approximately 8 percent compared to the same period last year.
Industry experts point out that a smaller number of listings, sellers having more realistic expectations, and less competition among properties can drive up clearance rates, even while broader market environments remain tepid.
They say higher interest rates have reduced buyers’ borrowing capacity, while economic uncertainty and recently legislated tax changes affecting property investors have also weighed on confidence.
‘Significant change in the market conditions’
Sydney recorded a preliminary clearance rate of 57.5 per cent from 452 auctions, up almost six percentage points from the previous week.
Melbourne’s rate rose 1.7 percentage points to 56.2 per cent across 585 auctions.
But clearance rates remain weak by historical standards and property experts have urged caution, saying it was too early to tell whether last week’s uptick reflected a broader trend.
Real Estate Institute of Australia president Jacob Caine said the auction market was still adjusting to uncertainty.
“The brutal reality is that the auction market in general is relatively flat compared to recent historical performance,” he said.
“The external factors around tax, around policy, around international concerns are creating uncertainty.
“In an uncertain market, both sellers are more reticent to offer their property via auction, buyers are more reticent to put their hands in the air and bid on properties.”
Caine said there were fewer homes available at auction, but many sellers were becoming more realistic about price expectations.
“[Buyers are] still out there and they’re still active, but they’ve got fewer choices in the auction market,” he said.
“As a result, auction clearance rates tend to bump up quite significantly when you see a drop-off in those volumes.”
He said agents were having “difficult conversations” with vendors about the changing market.
“[They are informing] them perhaps that the property being offered today, in contrast to a neighbouring property that might have been offered 12 months ago, is a radically different proposition,” he said.
Cotality head of research Gerard Burg said auction volumes were down about 8 per cent compared with the same time last year.
“This time last year, we were in the process of seeing rate cuts from the Reserve Bank. There was a lot more optimism [about] the direction of rates,” he told SBS News.
“Now, where we’ve had three rate rises this year, still a little bit of uncertainty … so from that point of view, [there has been] quite a significant change in the market conditions.”
Burg said that while some heat had been taken out of the market in in Sydney and Melbourne, affordability remained a major barrier for many buyers because higher interest rates had reduced borrowing capacity.