Melbourne auction market down as interest rates rise

Melbourne recorded its lowest weekend auction clearance rate of the year on Saturday, with buyer activity falling following the announcement of higher home loan interest rates.

The clearance rate was 73 per cent – down from 74.3 per cent reported the previous weekend and below the 76.4 per cent recorded over the same weekend last year.

Clearance rates have fallen nearly 7 per cent since the 79.9 per cent recorded on August 15. 

The decline in clearance rates over recent months follows the implementation of various so-called macro-prudential policies by financial regulators. These policies have resulted in higher interest rates for investors and also for Westpac owner-occupiers as announced last week – with other banks surely set to follow with similar rate increases.

Investor activity fell dramatically over July and August in all states, according to the latest ABS residential loan data, and capital city home auction clearance rates have also generally fallen significantly over the same period.

Although the Melbourne market fell at the weekend, results nonetheless generally remain in favour of sellers. The local market is clearly now the best performer of all the capitals.

Relatively high numbers of listings have been a feature of the spring market with last Saturday hosting 1233 auctions, just below the 1240 listed over the previous weekend. That is well ahead of the 1005 auctions conducted over the same weekend last year.

More than 1500 auctions are scheduled this weekend, which is likely to be the second highest auction day on record – just below the 1558 conducted over the same Super Saturday pre-Melbourne Cup weekend last year. It also looms as the market’s biggest test of the year.

Notable sales reported at the weekend included a four-bedroom home at 91 Were Street, Brighton sold for $3,705,000 by Buxton, another four-bedroom home at 35 Davis Street, Kew sold for $3.1 million by RT Edgar Jellis Craig, a four-bedroom home at 41 Anderson Street, Malvern East sold by Abercromby’s Real Estate for $2.95 million, another four-bedroom home at 38 Staughton Road, Glen Iris sold by Marshall White for $2.9 million and a four-bedroom home at 41 Merton Street, Albert Park sold by Greg Hocking Holdsworth for $2.82 million. 

The most expensive property reported sold at auction at the weekend was a four-bedroom home at 49 William Street, Brighton sold for $3,902,000 by Buxton. The most affordable property reported sold at the weekend was a one-bedroom unit at 5/107 Hudsons Road, Spotswood sold for $251,000 by Sweeney Williamstown.

Full weekend auction results

The trend auction price fell again at the weekend and was down from the previous weekend’s $783,250 to $774,250. The auction price trend has now fallen over four consecutive weekends and remains just 6.3 per cent higher than the $728,250 recorded over the same weekend last year.

The recent fall in clearance rates may impact both buyer and seller confidence, though the local market remains relatively robust. The spectre of higher interest rates challenging the housing market may be offset by a cut in official rates next month. Latest weak ABS jobless data for September surely adds to the case for a cut.

The seasonally adjusted unemployment rate remained steady at 6.2 per cent over the month despite a fall in the number of employed. Only a drop in the participation rate kept the jobless rate steady as discouraged job seekers and retirees departed the workforce. The national unemployment rate has remained intractably above 6 per cent for 16 consecutive months.

Dr Andrew Wilson is Domain Group’s senior economist