Spring traditionally sees an influx of listings, increased buyer activity and an almost palpable buzz at open for inspections and auctions. But with seven consecutive interest rate rises in as many months, what does the market look like this Spring? Let’s take a look at the story three key market indicators are telling.
Auction Clearance Rates
The auction clearance rate is the percentage of properties successfully sold prior to, or at auction. According to Domain data, auction clearance rates across the combined capital cities and combined regionals increased in September for the second month in a row. Adelaide’s clearance rate was the strongest at 67.3% followed by Melbourne at 58.9%.
While a rising auction clearance rate doesn’t explicitly point to a turning of the tide when it comes to the property market, more homes selling at auction (rather than passing in) does reflect that seller and buyer price expectations are beginning to align.
In the same period, auction volumes rose month on month across both combined capitals and combined regionals. Increased auction volume suggests seller confidence may be making a comeback, it seems collectively we have surpassed the initial fear of a market downturn and are learning how to navigate the transitioning market.
Property Prices
There’s no sugarcoating it – property prices are falling. But, what’s important to note is that while we’re undeniably in the midst of a downturn, property prices across the country remain ~15% above pre-pandemic levels.
According to CoreLogic data, Australian property prices fell by 1.4% in September. This decline is a slight improvement on August price falls (1.6%) although not significant enough to point to a changing of the tide. In the same period, in Sydney, property values fell by 1.8%, by 1.1% in Melbourne and Brisbane was down 1.7%. Meanwhile, Adelaide and Perth recorded softer declines of 0.2% and 0.4% respectively.
A telltale sign of tightening affordability, house prices across the capitals lost more value than apartments, falling 1.5% in September compared to a 0.7% fall for units. One market that is seemingly immune? The prestige market – a scarcity of luxury homes for sale is continuing to fuel record-breaking prices from coast to coast.
Interest Rates
When it comes to interest rates – the major battle is the unknown. While the future of rate rises is unclear, the big banks are predicting the RBA’s cash rate to peak by the first quarter of 2023 somewhere in the 3% range. In October, the RBA surprised economists and the market, hiking the cash rate by 25 basis points – half the expected increase.
The full effect of the last seven rate rises is perhaps yet to be felt entirely, however, we seem to have accepted the initial shock to the system and adjusted to the new normal.
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