Australia's residential real estate market experienced a downturn this past week, with auction clearance rates dropping significantly as concerns about an upcoming interest rate hike intensified. Property researcher Cotality reported that the rate of homes sold fell by 4.6 percentage points to 54%, despite a 16% increase in the number of homes taken to auction across capital cities, totaling 1,832 properties.
The weighted average final auction clearance rate across combined capital cities further declined to 49.1%, marking the 15th time in 17 weeks it has been below 50%. This figure is down 3.5 percentage points from 52.6% the previous week and a substantial 22.5 percentage points lower than the 71.6% recorded a year ago. Auction volumes rose by 16.2% to 1,841 from 1,585 the prior week, though still 30.2% lower than the 2,638 held a year earlier.
Of the 1,841 reported results, 652 properties, or 35.4%, were passed in, and 285 properties, or 15.5%, were withdrawn. Passed-in auctions accounted for 69.6% of unsuccessful results, indicating a potential disconnect between buyer and vendor price expectations. Higher interest rates are likely contributing to reduced demand, with the Reserve Bank of Australia having already increased the cash rate three times this year to 4.35%. Economist Annabelle Mezieres of Cotality noted that each rate increase reduces buyers' borrowing capacity.
Across individual cities, Melbourne recorded the highest preliminary clearance rate at 54.2%, despite a 3.1 percentage point fall, and hosted 918 auctions. Sydney's clearance rate dropped 6.6 percentage points to 46.2%, the lowest since early August, with 569 auctions. Adelaide saw its clearance rate slip to 46.4%, while Brisbane posted the lowest among capitals at 31.4%. Canberra was one of the few cities to improve, with its clearance rate rising 10.5 percentage points to 53.6%. Looking ahead, 1,537 homes are scheduled for auction this week, a 16.5% decrease from last week.
Despite the decline, the preliminary clearance rate of 54% remained above the winter average of 52.3%. Buyers are still showing interest in quality properties, taking advantage of an average 7.1% fall in values since February. For example, a three-bedroom house in Sydney's Petersham sold for $2.311 million, above its $2 million reserve, illustrating that motivated buyers are present. The spring selling season typically sees increased activity, but this year's higher borrowing costs are a significant factor.
