Although the current mood around the Australian property market lately is largely one of pessimism, there is more to be discovered if you look a little deeper into the results. Simply breaking down national and regional auction clearance rates can give an entirely different picture to the one we may have in mind – especially at this unique moment in time.
The beginning of any year is traditionally quiet and the March quarter of 2019 has been no exception. The proximity of Easter to Anzac Day this year resulted in an unusual (but let’s face it – glorious) spread of holidays, taking up almost a third of the month. In addition, there is the federal election on May 18. Unique variables such as these all create a specific environment that can influence how the market behaves – from a drop in properties being listed and auctions being scheduled, to an increase in buyer interest, in specific areas, due to local factors.
So, how can current numbers being reported help us to know what’s ahead? Well, because the elements outlined above can impact on the market in ways that can’t always be predicted – it’s worth breaking down what has happened, to put normal activity into perspective and give us a sense of whether the market tipping point is looming.
In the final week of March, there had been 2,164 auctions nationally, with 50.9 per cent of those cleared. Auction clearance rates across the country have remained largely steady; though overall rates increased 6.6 percentage points from the December quarter to 49.9 per cent overall for the first quarter of 2019. Everybody expected there to be a slight downturn in April and nobody lost that bet. In early April, there were 1,978 auctions held across the combined capital cities, which also delivered preliminary auction clearance rates of above 50% for the 5th week running at 57.2%. The federal election was announced, the Easter Bunny started clocking on for overtime shifts and, in the period, leading up to the ten-day break, just 394 auctions were held Australia wide, with clearance rates dropping to 43.9 per cent. CoreLogic predicted an increase to 2,098 auctions for the post Easter spike, but in reality, stock remained low, though clearance rates bounced back - just 1,019 properties went to auction and of those, 54.6 per cent were sold. The clearance rate on residential houses was 56.8 per cent, while units sat a little lower at a 49.6 per cent clearance rate. (i.e. almost 60% of houses scheduled for auction sold and almost 50% of auctioned units sold - for those who’ve seen the term ‘clearance rates’ too many times now). What this means in terms of the market over the long term is that things are stabilising and signs look good for the future. Even when an unusual set of circumstances occur, the market has been able to bounce back.
From a state by state perspective, some of our cities have started to rally, with Sydney recording higher clearance rates, while Melbourne is benefitting from an increased supply of stock to market. Melbourne sent just 50 homes to auction over Easter but that picked up to almost 500 properties in the week after (with Anzac Day on Thursday). While Sydney improved on the pre-holiday auction numbers of 221 properties, to send 329 to auction in the post Easter period. Clearance rates in both cities hovered between 49 and 55 per cent.
According to CoreLogic, national clearance rates throughout March and April showed signs that specific areas in parts of Melbourne and Sydney’s inner west are outperforming others. Sub regions such as Sydney’s inner south west and inner west are recording above average clearance rates of almost 76 and 67 per cent respectively, while Melbourne’s inner south and west are similarly out performing with clearance rates of around 72 and 63 per cent respectively.
Though Sydney and Melbourne showed the greatest overall results, Perth, Canberra and Tasmania also had a stronger supply of properties, while both Adelaide and Hobart experienced a drop overall in available stock scheduled for auction. This tracks with the numbers from the March quarterly report, but obviously there’s a significant shift in results thanks to the out of the ordinary holiday bonus days we were presented with this April.
So, are we approaching a tipping point where the Australian property market is concerned? Given the federal election is the next big thing to impact, it’s hard to predict exactly which way things will go although many market analysts are beginning to suggest the worst may be over. However, there are major changes in store for homeowners if there is a change in government and that may steer the market in a completely different direction. The Easter dip was to be expected but the bounce back to its previous stable position is certainly encouraging. The coming weeks will be interesting so Australian homeowners and investors should be doing their due diligence, checking in with their advisors and reassessing their position for whatever scenario may unfold after May 18th.