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Real estate experts indicate that potential homebuyers are adopting a “waiting game” approach, hesitant to make offers on new homes and leaving sellers who need to offload properties in a difficult position.
According to property research firm Cotality, auction clearance rates in major cities are currently below 60 percent. After the Easter break, the rate showed a slight improvement, increasing from 55 percent to 57 percent last week.
The decline in buyer interest is particularly noticeable in Australia’s largest housing markets, Sydney and Melbourne.
Gerard Burg, Head of Research at Cotality Australia, observes that these regions are now “transitioning to buyer markets.” As a result, many sellers are opting to withdraw their properties from auction or are postponing the sale process.
Nationally, clearance rates have hit their lowest point in 15 months, excluding periods affected by quieter public holidays.
Current national clearance rates are at their lowest for 15 months, for outside quieter public holiday periods.
In Sydney and Melbourne last week they were 54 per cent and 57 per cent, respectively.
About 2650 homes across Australia are scheduled for auction this week. Both Sydney and Melbourne have more than 1000 homes going under the hammer.
The unseasonal plunge in clearance rates comes after two consecutive interest rate hikes curtailed buyers’ budgets. There are also worries a third may be on the cards when the Reserve Bank board meets to fix rates next month.
It all adds to the economic fallout from the Iran conflict which has seen spikes in the cost of fuel and other essentials hammer household budgets.
Now the concern is approaching months may bring a winter of discontent for the property market instead of a mid-year revival.
Brett Sutton, a mortgage broker at Two Red Shoes in Sydney, says the weeks ahead look uncertain.
“What we’re seeing is not a complete slowdown or stop to the market, but people being cautious,” he said.
But the prospect of a “subdued” winter for home sales across suburbs remains while the Iran war lasts, he says.
Another factor impacting sales is property investors pulling back amid reports about changes to the capital gains tax and negative gearing in next month’s federal budget.
“Those investors who are thinking of purchasing for capital gains reasons are probably sitting and watching now.”
Industry experts say the fundamentals of the Australian property market remain strong, especially in many capital cities where demand outstrips supply. But they say vendors should be prepared to accept lower auction prices if they need to sell now.
Other capitals look rosier
Burg says the national outlook is less gloomy, with Perth and Brisbane the bright spots.
Properties in the WA capital are selling in a median time of nine days, while Brisbane homes go in about 17 days.
Adelaide has been the strongest performing of the smaller capital cities. Last week, the South Australian capital recorded an auction clearance rate of 70 per cent.
Looking ahead, Sutton says the Reserve Bank’s policy on interest rates over coming months will have a big impact on buyer’s spending power.
Static property prices and higher rates would create a perfect storm of barriers for anyone looking to purchase a home, he says.
”It will be just that much harder to buy.”
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