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Buyers remain in control as auction market continues to soften
The early auction clearance rate for the combined capitals has dipped to 50 per cent once again, with buyers continuing to have the advantage of better negotiating power in a softened market.
New data has shown that the preliminary clearance rate for the combined capitals slipped to 50 per cent last week, down from 54.8 per cent the week prior.
According to Cotality’s latest Market Indicator Summary, auction volumes also remained low, with 1,365 auctions last week, a 4.7 per cent increase from the previous week, but 12.6 per cent below the same week last year.
The result is expected to be revised down to 48 per cent, with Cotality comparing the recent sustained lows to conditions last seen during a sharp decline in 2018.
Cotality’s head of research, Gerard Burg, said the clearance rates had improved slightly compared to June, but by historical standards, clearance rates in the low 50s range remain fairly weak.
He said that demand had continued to fade across several months, as a result of affordability and serviceability pressures, followed by three rate rises and the conflict in the Middle East.
“Those buyers who remain in the market are benefiting from a greater choice of properties with less urgency to make an offer than was the case late last year. This puts them in a stronger position to negotiate with vendors,” he told SPI.
Sydney held 444 auctions, with the preliminary clearance rate falling sharply to 47.4 per cent, having stayed above 50 per cent for the previous two weeks, and only just above the low of 47.3 per cent seen in late June.
In stark contrast, Melbourne recorded its strongest preliminary result in weeks, with 56.5 per cent of homes sold, up from 56.2 per cent the week before.
Menck White co-founder Clarence White said that in Sydney, buyers continued to be spread thin due to affordability pressures, with price gaps between vendors and buyers persisting.
“Vendors are probably getting a little better at understanding where the market is, but that still often means there's a gap,” he told SPI.
“Buyers are so cautious on price at the moment that it almost doesn’t matter what you do, what your price code is and what your vendor’s expectations are.”
According to Menke, a few properties had been exceeding reserve prices, with further negotiations required in most cases.
“Even if we do get competitive bidding, then we’re still having to work with the highest bidder to try and bridge a gap between that and the seller.”
Menck said while some sellers were continuing to price too high, others understood the current conditions and were trying to cater for more tentative buyers.
According to Burg, volumes in Sydney have been falling year-on-year at a faster rate than the national average since the first week of June.
“While the number of newly listed properties for sale has been declining rapidly since May, the total stock of listings remains comparatively elevated, almost 13 per cent the five-year average for the four weeks ending 19 July, having moved above average in March this year.”
Among the mid-tier capitals, Brisbane’s clearance rate remained weak, with only 35.9 per cent selling, 43 per cent down from the week earlier but still up from the 23.8 per cent result three weeks ago.
In Adelaide, the preliminary clearance rate slipped to 54.9 per cent, from 59.1 per cent the week before.
Further, Canberra recorded a preliminary clearance rate of 27.8 per cent out of 42 auctions, its weakest early reading since March 2019, while Perth held eight auctions and Tasmania had one.
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