Auction results in recent weeks point to signs of recovery in Australia’s property market as auction clearance rates rise from an all-time low of less than 30% to over 70% in the Sydney market.
While the results look optimistic, experts say these initial results may not necessarily be indicative of the near future of the market.
Public auctions have had a slow re-emergence in the Sydney and Melbourne property markets, after a seven-week halt on traditional auctions due to coronavirus restrictions.
For some cities this has marked the first return to on-site auctions since March, when non-essential gatherings were banned by the federal government as part of the suite of coronavirus social distancing restrictions.
The number of homes scheduled for auction continues to trend lower, with only 365 auctions to take place this week, lower than the 480 auctions last week. Read more: https://t.co/bSXarJNAvH— CoreLogic Australia (@corelogicau) May 13, 2020
The restrictions imposed on home opens and public auctions have already impacted the property market after just seven weeks, with asking prices on properties plunging around the country in recent weeks even as house prices remain mostly steady.
The effects of the coronavirus restrictions are predicted to continue to affect the property market in coming months, with experts predicting a worst-case scenario could see the housing market fall by as much as 30%.
As restrictions begin to lift around the country, activity in the auction market has remained below average, and although auction clearance rates have strengthened in recent weeks activity remains low.
In the first week of lifted restrictions the Sydney property market, typically one of the country’s stronger auction markets, saw 216 homes taken to auction resulting in a preliminary clearance rate of 66.3%, while last week a further 193 properties were scheduled for auction, with a preliminary clearance rate of 73.4%.
Auction sales saw a wide variation of properties sold, with a five-bedroom house in Sydney’s Mosman selling for $7.5 million after having been passed in at auction.
While Sydney’s preliminary clearance rate suggests that the relaxing of coronavirus related restrictions have had a positive impact on the industry.
According to CoreLogic analyst Kevin Brogan, clearance rates should be interpreted with caution as the number of properties going under the hammer remain unusually low.
“Sydney, one of Australia’s largest auction markets, returned a preliminary clearance rate above 70%, suggesting the relaxation in social distancing policies specific to housing are having an immediate and positive impact on home auctions, although the number of auctions remains well down on last year,” said Mr Brogan.
The ongoing effects of restrictions were felt harder in Melbourne where just 118 properties were scheduled for auction last week returning a preliminary clearance rate of 60.2%.
In the previous week 163 home auctions lead to a 56.5% preliminary clearance rate.
Melbourne’s auction results may be caused by a lack of confidence in the market.
The state has been hit with a higher number of coronavirus cluster outbreaks and stricter lockdown conditions than many other states, with Victoria continuing to allow a maximum of 10 people to attend on-site auctions.
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On-site home auctions are being reintroduced across the country with Victoria and New South Wales joining Western Australia, the Northern Territory and Queensland, in easing restrictions to allow on-site auctions and property inspections where social distancing regulations are still enforced.
Around the country 400 capital city properties were taken to auction, and a further 480 home were auctioned the week prior.
Comparatively, this time a year ago 930 capital city homes were scheduled for auction. However, while clearance rates a year ago were around 55%, clearance rates for the last two weeks have seat between 59% and 64%.
According to CoreLogic, however, these figures should be interpreted with caution.
Auction volumes that are substantially lower than usual may have taken effect on clearance rates, but with the further easing of restrictions in coming weeks there will likely be an increase in homes taken to auction.
Director of Ray White Surry Hills Ercan Ersan, predicted that activity in the market could possibly pick up in July and August.
“Real estate is generally driven by market confidence and when you have things like the easing of restrictions, low-interest rates, banks still lending and a lack of stock on the market, it generally makes things perform really well,” said Mr Ersan.
Preliminary auction clearance rates dropped below 30% over the Easter long weekend in April, the lowest rate recorded by CoreLogic in their 12 years of auction reporting.
The clearance rate is calculated by dividing the total number of properties sold at auction by the total number of auctions reported.
This is used as an indicator of whether the property market is currently favouring buyers or sellers.
A clearance rate of 60% considered to be low, indicates a buyer’s market where auction interest is low and house prices are declining.
A clearance rate of more than 75% indicates a seller’s market, where buyer demand is high and available property is low.
A high withdrawal rate of 57% dragged down auction clearance rates over the Easter weekend as social distancing restrictions proved problematic for the housing market.
While the easing of restrictions and historically low interest rates are both positive steps for property markets around the country – economists warn that rising unemployment, lowered household incomes and halted immigration, rising rental vacancy rates and lowered rental incomes, have yet to take effect on the market.
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Nonetheless, the digital advances taken during the restrictions may also have a positive impact on the market moving forward, with a number of agents continuing to hold both on-site and online auctions to allow a wider market to participate in bidding.
Words by Danielle Austin
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