Australia’s auction market gets a reality check

Last weekend, the housing market's correction appeared to be stabilising as the national auction clearance rate soared to a 19-week high of 52.6%. However, this optimism was quickly dashed this weekend, with Cotality's preliminary auction results revealing a significant setback. The preliminary clearance rate dropped by 4.6% to 54.0% across the combined capital cities, despite a 15.6% increase in auction volume over the week.

The downward trend in clearances was coupled with growing concerns about interest rates, as expectations rose ahead of the Reserve Bank's monetary policy meeting scheduled for 29 September. This marked the sixth consecutive week where auction volumes had fallen more than 30% compared to the same period a year earlier, indicating a combination of limited new listings in spring and fewer vendors opting for auction sales due to low clearance rates and limited registered bidders.

Notably, Melbourne faced the most dramatic decline, with its preliminary clearance rate plummeting by 7.0% to an all-time low of 56.3%, the lowest reading in three weeks. Sydney also suffered, with its clearance rate slipping by 5.4% to 54.2%, marking the lowest preliminary result in seven weeks. Brisbane, on the other hand, saw a modest 3.0% increase in auction volume compared to the previous week.

Yet, only 37.5% of auctions resulted in a successful sale, a 4.1% decrease from the prior week. The broader picture is one of an ongoing house price correction, with values dropping by 1.3% over the past month in the five major capital city markets. This decline, which continues at a sharp quarterly pace of 3.9%, has been recorded in each market, with each experiencing significant falls.

Currently, there are no indications that the housing correction is easing, and with the Reserve Bank expected to raise rates two to three more times, the downturn could yet intensify.