Residz Team 4 min read
The jasmine is in flower and spring is in the air. And there’s a spring in the step of the Australian property market which is seeing a surge in the number of auctions in some cities. It seems home sellers are getting on the front foot of the traditionally busy selling season, and forcing buyers to auction to get things moving.
But could this also be a signal that some home vendors are struggling?
Let’s look at the latest data from CoreLogic’s Auction Market Preview for the week ending 20 August 2023 and assess the prevailing trends, challenges, and opportunities for both buyers and sellers.
Auction Volumes on the Rise
CoreLogic says the combined capital cities are preparing for a significant uptick in auction volumes. Hosting 2,133 homes, the week ending August 20 stands as the fifth busiest auction week of the year-to-date and the busiest since early April. This marks a week-on-week increase of 10.6% and 17.5% growth from this time last year. As six out of the seven capitals gear up for more auctions, the momentum appears robust and positive.
Spotlight on Sydney and Melbourne
Sydney emerges as the star of the auction market this week, with 890 homes slated to go under the hammer. Demonstrating a 16.3% rise from the previous week and a remarkable 39.3% year-on-year growth, Sydney's auction scene is booming.
In contrast, Melbourne is witnessing a minor dip in auction activity, albeit it remains strong with 856 homes scheduled. The 2.4% decrease from last week's 877 auctions is counterbalanced by the 9.9% growth when compared to last year.
Smaller Capitals Holding Strong
Brisbane, Adelaide, and Canberra are all set to experience more than 30% growth in auction activity this week, signalling improved confidence in the market. Brisbane takes the lead among the smaller capitals, with 158 homes on the block, followed closely by Adelaide (117) and Canberra (94). Perth and Tasmania, while operating on a smaller scale, are still contributing to the overall auction landscape with 16 and 2 homes respectively.
A Sudden Boost
So what are the reasons? A noticeable increase in fresh listings suggests that many vendors are looking to get ahead of what promises to be a highly competitive spring selling season.
But the number of listings was already going up in winter, prompting Tim Lawless, executive research director of CoreLogic’s Asia–Pacific research division, to share his thoughts:
“The counter seasonal lift in vendor activity can probably be attributed to the positive turn in housing values across most regions since March alongside historically low advertised supply levels working to boost vendor confidence.”
“Anecdotally, we may also be seeing more homeowners needing to sell amid a peak in the ‘fixed rate cliff’, elevated interest rates and high cost of living pressures.”
Tim indicates this upward trajectory is expected to remain, saying “we are likely to see mortgage stress becoming more evident through the second half of the year.”
Clearance Rates Indicate a Healthy Market
Meanwhile, data from the previous week witnessed a bounce back in auction activity across the capitals, with 1,929 homes auctioned – a rise of 10.5% from the preceding week and a significant 19.7% growth year-on-year.
This surge in volume was paralleled by a slight week-on-week rise in clearance rates, halting a four-week dip. A total of 64.7% of auctions resulted in a successful sale, slightly higher than the 64.5% from the week prior. These numbers show a sharp recovery from the 56.0% clearance rate recorded the same time the previous year.
The Melbourne-Sydney Tug of War
Last week, Melbourne had 877 auctions, with a 60.6% clearance rate. Though this marked a 4.4 percentage point drop from the week before, it’s still higher than the 58.8% from last year.
Sydney, with 765 auctions, saw a clearance rate of 68.4% - the highest in five weeks. Factors contributing to this success include a decline in the withdrawal rate and fewer properties passing in at auction.
The Verdict
Australia's auction market, especially in cities like Sydney and Melbourne, could be a litmus test for the economy. With larger mortgages needed to buy properties in these big cities, compared with homes in the smaller capitals, a lift in the number of homes for sale may signal some mortgagees are struggling.
However, the lift in auction listings may also suggest that the property market got a confidence boost from the RBA’s decision to hold interest rates. There is some talk it may be the end of the rate rises, with rate reductions for mid to late 2024 mooted.
Either way the growing auction numbers and healthy clearance rates paints a promising picture for both home buyers and sellers needing to or wanting to move before Christmas.
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