According to the Domain Auction Report, which was released yesterday, Sydney’s September clearance rate was 69.8%, down from 73.9% in August and the lowest the city has seen since September 2012.
It’s not just the Sydney market where clearance rates are declining. According to the report, results worsened in all but one capital city over the month.
“The first month of spring has provided mixed results, with all major capital cities except Adelaide reporting decreases in clearance rates over the month,” Domain senior economist Andrew Wilson said.
“September home auction activity is now generally tracking below last year’s September levels,” Dr Wilson said.
Dr Wilson said the declining clearance rates could become the norm in coming months, with predictions of booming auction volumes.
“Record-high volumes of auctions will continue to test capital city markets for the remainder of the year, providing greater competition amongst sellers and more choice for buyers,” he said.
“This is likely to continue putting downward pressure on clearance rates – particularly in Sydney, and to a lesser degree Melbourne.”
That downward pressure could see clearance rates move towards results between 50 – 60%, Wilson suggested.
“If that happens things could even really start favouring buyers as there’s not as much competition anymore.”
Dr Wilson said there are likely to be weekends in the near future where both Sydney and Melbourne could each have more than 1,000 auctions scheduled, which he said could point to investors looking to cash in at the end of price booms.
“Typically we see volumes increase as a cycle ends as people look to pick the absolute last moment to sell to make sure they can get the highest price possible.
“I think that’s what’s probably motivated a lot of people to sell in Sydney and Melbourne as we’re really starting to see some of the heat come out of those markets.”
Wilson said the declining clearance rates will likely lead to some moderation of price growth, and the city touted by many as the next investment hot spot, Brisbane, is likely to feel some of that.
“Brisbane has been disappointing. The market there has gone sideways after it looked like it was building up a head of steam.
“In saying that it there’s still a lot of investors heading there and its poor auction results might just be because more people are turning to auctions because they think they’ll get a better price that way.”
While the bigger markets in Sydney, Melbourne and Brisbane may be showing some signs of weakness, Dr Wilson said there are also some markets showing some surprising resilience.
“Remarkably Adelaide’s showing signs of resilience even with the worst performing economy on the mainland and I think it’s going to be one of the markets that grows more this year than it did last year.
“Canberra is also showing some resilience, its auction results slipped over September, but that was after a very big August.
“Canberra’s been volatile for a while now, but it seems to be settling, people forget that four or five years ago it was matching what was happening in Sydney and then it went nowhere, but now with a friendlier budget this year it’s showing some good signs.”
