Sydney and Melbourne auction clearance rates plummet, as buyers and sellers get the jitters

Auction clearance rates are trending down, with both Melbourne and Sydney’s rates dipping below 60 per cent, suggesting buyers are treading cautiously amid back-to-back interest rate rises and the ongoing geopolitical crisis.

Melbourne’s auction clearance last sat above 60 per cent in the week of February 22 through to 28, at 63 per cent. It currently sits at 55 per cent – this time last year, it was 62 per cent.

In Sydney, the clearance rate fell 6 percentage points in the last month alone, from 60 per cent in the week of March 8 to 14, to 54 per cent as of this weekend.

Domain chief of research and economics Dr Nicola Powell says the property slowdown happened quickly after a strong start to the year.

“I think a lot is changed since the beginning of this year, particularly with the conflict in the Middle East – the length of time that has been going is having an impact here,” she says.

“In addition, people weren’t expecting back-to-back rate hikes from the Reserve Bank of Australia, and that has sent a bit of a curveball into the housing market.

The first interest rate hike of the year was announced on February 3, followed by a second on March 17.

“It has rattled buyers who are much more mindful of the debt they take on. It seems the outlook for this year has changed markedly.”

Powell says clearance rates dropping below 60 per cent can indicate a cooling market.

“Anything above 60 per cent indicates prices are going to rise but once you see a dip below 60 per cent, you see prices start to soften,” she says.

Powell notes that clearance rates are a good barometer of buyer and seller sentiment.

“Buyers are reacting to the fear factor much quicker than sellers,” Powell says. “When sellers can’t achieve the price they think their home is worth, they will often delay the sale and wait for market conditions to improve.

“But when the market is starting to slow down, it’s all about a realistic price expectation.

“To get a timely sale and to sell by auction, it all comes down to the asking price. Sellers need to be mindful that we are expecting more rate hikes to come through this year, and that is going to apply the brakes on market conditions.”

In Melbourne’s inner west, agent Elise Nemer from Jas Stephens echoes Powell’s views, saying buyers were acting with caution.

“Buyers are scared of the one or two interest rate rises which we are expecting,” Nemer says.

“But this is normal. It’s just taking buyers a little time to get used to having a normal interest rate again.”

SOLD - $1,300,000

68 Severn Street, Yarraville VIC 3013

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Nemer sold the inter-war Yarraville classic at 68 Severn Street for $1.3 million at the weekend, after a busy campaign. But two Jas Stephens properties in Footscray passed in.

“The smart buyers would say this is a good time to purchase. You can get the house, maybe, for the price you think it’s worth.

“I am also seeing vendors being more realistic, and properties are mostly selling within our price guide.

“The motivated vendors who understand the market are still selling.”

Nemer cautions vendors against delaying auctions.

“I wouldn’t postpone an auction just because there’s no interest – do the auction, flush out the buyers, make sure they speak up, and sometimes that generates interest afterwards.

“I had a property pass-in on the weekend with no interest, then had a genuine inquiry on Sunday.

“The market is not going to stay like this. It will go back up. If I was a buyer wanting to secure something, I would do it in this market.”