Results for week ending July 31
A 2016 record result for Sydney and another stellar performance for Melbourne pushed the combined capital city clearance rate up to 73.9 percent this week. Supply levels rose as well, with 1,585 auctions held nationwide, compared to 1,329 last weekend.
The Stats
The preliminary reports show Sydney’s clearance rate spiking up to just over 80 percent. The city was host to 494 auctions, which was nearly on par with last week’s volume of 473. Buying activity appears to be significantly higher than the 71.5 percent final result last week and even up from last year’s boom time clearance rate of 76.0 percent.
Melbourne’s preliminary clearance rate climbed higher to 75.6 percent, up from 71.6 percent last week. The city also saw a sharp increase in volume, returning to a level near last year. In the Victorian capital, sellers brought 749 homes to auction, up from 572 last week.
Adelaide had another strong showing, with a preliminary clearance rate of 71.6 percent. Volume also surged to 106 auctions, up from 68 last week.
The Graph
The Preliminary Numbers
Sydney
Melbourne
Brisbane
Adelaide
Perth
Tasmania
Canberra
Clearance Rate
80.4%
75.6%
55.4%
71.6%
42.9%
No sales reported
75.0%
Auctions
494
749
152
106
33
5
44
The Analysis
Homebuyer demand in Sydney and Melbourne appears to be on the rise. The boost in buying activity is even more pronounced by the increase in supply. If the auction volume increases, even more bidders must be successful to increase the clearance rate. Though Sydney’s supply remained flat, both Melbourne and Adelaide auction volume spiked.
In line with strong clearance rates, capital city home prices on average have continued to rise. According to CoreLogic’s index, Sydney, Melbourne, Adelaide and Hobart are recording monthly price increases greater than 1 percent; offsetting declines in Brisbane, Perth and Darwin. Sydney’s median house price is now back above $1 million and Melbourne’s median has surged to a new record of $740,995.
What It Means For Investors
Even though property values have never been higher, the mindset of homebuyers remains very optimistic. We are the lucky country that has not experienced a recession in over 25 years. It will take more than a little drama in Europe to bring a correction.
In fact, it’s hard to see anything other than higher interest rates or a credit crunch overseas that could diminish buyer demand. We almost certainly won’t be seeing higher interest rates anytime soon.
The RBA just cut the cash rate even further, to a record low 1.5 percent. Now we wait to hear whether any lenders will be kind enough to pass along their savings. Don’t hold your breath, as the banks will likely be facing tougher capital requirements in light of rising home prices, and will still need to deliver profits to shareholders.
For the historical data of weekly auction clearance rates, click here.
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