Sydney Auctions Are Off the Boil

Published : 28 October 2015

Auction results in Sydney are already reflecting the recent mortgage rate hike by Australia's Big 4 banks.

Auction success was already starting to diminish, according to CoreLogic RP Data, and last weekend the figures fell even further.

There's always been mixed schools of thought on the success of auctions in selling real estate and now it seems, it has potentially had its day.

Auction results have been consistently moderating, especially in Sydney, where clearance rates have been sub 70% consistently over the past couple of months.

Tim Lawless, Head of Research at CoreLogic RP Data, says this is one of several factors hinting at a market peak.

“It’s important to remember that strong housing market conditions have been evident in Sydney and Melbourne while every other capital city has shown relatively sedate conditions," he said.

The September CoreLogic RP Data home value results released two weeks ago showed that Sydney dwellings values remained flat over the month. Simultaneously, other data flows are pointing to a moderation in growth conditions across Australia’s largest city and the broader housing market.

Mr Lawless said listing numbers were rising - which you would expect at this time of year, but a higher than normal number of homes are being added to the market in Sydney, which is contributing to higher stock levels than a year ago and rising months of supply.

Other key factors include:

  • Investment demand is moderating due to both tougher lending from the banks as well as market disincentives such as low yields, affordability constraints and a mature growth cycle.
  • Mortgage related activity has fallen across CoreLogic RP Data platforms. Although activity remains higher than a year ago, mortgage related events are down from heights seen over the first half of 2015 and aren’t seeing their normal spring bounce.
  • Rents are hardly moving which has pushed rental yields to historic lows in Sydney and Melbourne. Paying a landlord is likely becoming more affordable than paying a mortgage despite the low interest rate setting.
  • Supply levels are set to rise further as the pipeline of approvals moves through the commencement phase and onto completed housing product. Inner city apartment markets are most exposed to higher supply.

“While conditions may be starting to slow, particularly in Sydney, the coming months will provide further clarity about housing market conditions.

“Picking the turning point in the housing market is easy in retrospect. As the market evolves it can be hard to separate short-term movements from the beginnings of a longer term trend," Mr Lawless said.