RBA rate hike smashes auction market

The Reserve Bank of Australia (RBA) recently lifted the official cash rate to 4.6%, the highest level in 15 years. This decision has had an immediate impact on the auction market, with clearance rates falling sharply. Auction clearance rates have historically been a reliable indicator of dwelling value growth, especially in major capital city markets.

However, this year's clearance rates have been far below those of previous years, reflecting the significant decline in the nation's dwelling values. Since their peak in early April, dwelling values across the five major capital cities have fallen by 6.6%, with only 2 percentage points left to record the sharpest price correction in over 40 years.

Cotality, a prominent auction market participant, reported a preliminary clearance rate of only 48.2% for the weekend of the week ending July 12th, the lowest outcome since the week ending June 21st and the second-lowest reading for the year. Research director Tim Lawless attributes the weaker outcome to the recent rate hike, which has reduced prospective buyers' borrowing capacity and increased confidence concerns.

Low clearance rates outside Sydney and Melbourne have also contributed to the national decline, with only 25.6% of Brisbane auctions reporting successful outcomes so far, alongside 41.5% in Adelaide and 41.7% in Canberra. In contrast, Sydney and Melbourne have maintained clearance rates above 50%, at 55.7% and 50.6% respectively.

The impact of the RBA's decision is expected to continue into 2027, with records likely to be broken before Christmas.