Sydney’s home auction market has reached its weakest point in more than six years, while Melbourne recorded its worst result in almost five years, with clearance rates falling below 50 per cent.
New data from market research firm Cotality shows the preliminary clearance rate for the past week was 49.2%, meaning less than half of all homes offered for auction found a buyer.
Cotality estimates that figure will drop further once all the results are tallied, and will likely be closer to 40 percent.
A clearance rate above 60 percent is generally considered a balanced market.
Collapse of the capital
Sydney recorded a preliminary crime clearance rate of 47.3 per cent, the lowest since April 2020, the data shows.
In Melbourne, the rate was 50.2%, the weakest since COVID-19 restrictions were introduced in the city in September 2021.
Melbourne’s clearance rate was the lowest since September 2021. (Attached: Maria Magallanes)
Brisbane had the lowest crime clearance rate of any capital city at 39.3 per cent, despite a slight improvement on last week.
Adelaide excelled, with auction volumes jumping almost 24 per cent and clearance rates rising to 68.7 per cent – the best result in five weeks.
The data shows 21.5 percent of auctions were pulled from the market this week, down from the previous week’s preliminary figure of 23.6 percent.
A total of 1,771 homes went up for auction nationwide last weekend, down nearly 6 percent from last week and down more than 13 percent from last year.
Market compression
AMP deputy chief economist Diana Musina said the weak results reflected market compression from several directions.
“The root cause is multiple, but most recently has been linked to concerns about reduced investor demand in the housing market as a result of budget changes,” Ms Mussina said.
“The budget changes are another blow to the real estate market.”
Diana Musina says that the reason for the weak results is a number of reasons. (ABC News: John Gunn)
Changes in the May Budget mean that from July 2027, negative gearing on brownfield properties will only apply to new buildings.
The 50 per cent capital gains tax allowance will also be overhauled, replaced by an inflation-based system and a minimum 30 per cent capital gains tax.
The government has said the changes will help make housing more affordable, but critics say they will reduce demand for existing properties.
Ms Musina said AMP expects house prices to fall by about 5 per cent next year.
“The lack of supply of houses, particularly in capital cities, is a major factor that will keep house prices higher than they would otherwise be,” she said.
The housing shortage in the capitals helps maintain high real estate prices. (ABC News: John Gunn)
According to her, the terms may actually suit potential buyers.
“But the lack of listings could be a problem for them if sellers want to hold off knowing now is not the best time to sell.”
Treasurer Jim Chalmers appeared to downplay fears of a housing market slump in an interview with ABC Insiders today, likening the current weakness to a cycle of rate hikes in 2022.
“It’s best not to overreact to a week or two of data, or even a month or two,” he said.
Around 1,800 auctions are expected across the country next weekend.