Experts indicate that potential homebuyers are adopting a cautious approach, leading to a “waiting game” that is leaving sellers at a disadvantage. According to property research firm Cotality, the auction clearance rate in Australia’s capital cities remains below 60%, experiencing a slight bump from 55% over the recent Easter long weekend to 57% the following week.
The downturn in buyer interest is particularly evident in Sydney and Melbourne, the country’s largest real estate markets. Gerard Burg, head of research at Cotality, suggests these cities are shifting toward a buyer’s market, with many vendors either withdrawing their properties from auction or postponing them altogether. Currently, national clearance rates are at a 15-month low, outside of typical quieter public holiday periods.
For the previous week, Sydney’s clearance rate was 54%, while Melbourne’s stood at 57%. There are around 2,650 homes set to go under the hammer this week, with both Sydney and Melbourne each listing more than 1,000 properties for auction. This decline in clearance rates follows two consecutive interest rate hikes, which have constrained buyers’ budgets, with further increases anticipated when the Reserve Bank meets next month.
The ongoing conflict in Iran has exacerbated economic pressures, causing rises in fuel and essential costs that are straining household finances. This scenario raises concerns that the upcoming winter may bring a decline in property market activity rather than the expected mid-year comeback. Sydney mortgage broker Brett Sutton observes a degree of caution among buyers, indicating that while market activity hasn’t halted entirely, it is subdued.
Investors are also hesitant, especially in light of potential changes to capital gains tax and negative gearing set to be discussed in next month’s federal budget. Many of these investors are currently adopting a wait-and-see approach regarding prospective capital gains.
Despite these challenges, industry professionals maintain that the fundamentals of the Australian property market remain robust, particularly in many capital cities where demand outstrips supply. However, they advise sellers to be realistic about auction prices in the current climate.
In other regions, such as Perth and Brisbane, the outlook is more optimistic, with properties in Perth selling in an average of nine days, while those in Brisbane are taking about 17 days. Adelaide stands out among smaller capitals, achieving a 70% auction clearance rate last week. Looking forward, Sutton emphasizes that the Reserve Bank’s interest rate policy will significantly influence buyers’ purchasing capabilities, with stagnant property prices coupled with higher interest rates likely creating further obstacles for prospective homebuyers.