One-third of homes going to auction failed to sell in the last big week of the year, as a growing sense that borrowing costs have peaked – strengthened by last week’s interest rate decision – did little to boost buyer confidence.
Sydney’s preliminary clearance rate slipped to 66.3 per cent from 68.5 per cent a week earlier and the initial read on clearances in the smaller Brisbane market fell to 67.7 per cent from 76.1, data provider CoreLogic said on Sunday.
The subdued market was clear in the sale of three two-bedroom units in the same building at 39 Grasmere Road in Cremorne, on Sydney’s north shore, where the units – owned by the same vendor since construction in 1986 – sold at auction for their reserve prices.
Going for reserve prices: Unit 7 sold for $1.3 million, unit 11 for $1.15 million and unit 12 for $1.1 million in the strata block at 39 Grasmere Road in Sydney’s north shore suburb of Cremorne.
Unit 7 sold for $1.3 million, unit 11 for $1.15 million and unit 12 for $1.1 million at the midday Saturday auctions. All purchasers were first home buyers who had reached their borrowing limit and couldn’t go higher – and the vendor recognised that, Richardson & Wrench North Sydney agent Nicholas Farris said.
“When the rates were 2-3 per cent and ridiculously low, anyone could borrow money, anyone could throw $1.5 million at a unit,” Mr Farris said.
“If you’re selling at the moment … you can’t have stars in your eyes any more. It’s not going to sell.”
Most economists expect the Reserve Bank of Australia to keep the benchmark lending rate at 4.35 per cent after the decision at its last meeting for 2023. The next move will – eventually – be lower.
Lifestyle, views and a good price – but the Cremorne units still only sold at the limit of what the first-time buyers could afford.
But the full effect of the rate rises that started in May last year has still to play through and will limit what buyers can pay, AMP’s head of investment strategy and chief economist Shane Oliver said on Sunday.
“Just because rates have stopped going up doesn’t mean it won’t impact the market,” Dr Oliver told The Australian Financial Review.
Clearance rates in a handful of cities rose over the week to Sunday. Melbourne ticked up – to 66.1 per cent from 64.6 per cent – as did Canberra (to 60.8 per cent from 55.1 per cent) and Adelaide (to 80.7 per cent from 77.4 per cent), based on the reported 2087 results of 3110 auctions scheduled nationally.
But the east coast-dominated housing market is losing steam. Separate CoreLogic figures showed Sydney home values gained just 0.3 per cent in November, less than half of the 0.7 per cent gain they chalked up in October. Melbourne values slipped into decline, falling 0.1 per cent.
Clearance rates usually decline as data on more results becomes available, and the preliminary combined capital rate of 66.9 per cent – in line with the previous week’s 67 per cent, a figure later lowered to 60.7 per cent – pointed to a softening in the market, Dr Oliver said.
“We do have a downtrend in clearance rates,” he said.
“It seems as if this rebound, at least in Sydney and Melbourne, is petering out and you’ve seen a slowdown in price gains consistent with a slowdown in auction clearance rates, which is usually a tell-tale sign of buyers struggling.”
One market still going strongly is Perth, where a four-bedroom home on a 1014-square-metre block with R30 zoning that allowed up to three townhouses on the site attracted owner occupiers as well as developers at its auction on Saturday.
The four-bedroom home on 1014 sq m at 11 Tuart Street, Yokine, 7km north of the Perth CBD, sold for $1.355 million.
Auctions are unusual in the West Australian capital – there were just 11 scheduled this week – but a competitive auction pushed the deceased estate at 11 Tuart Street, Yokine, up to $1.355 million, $155,000 over its reserve price.
An owner-occupier beat two developers for the upwards-sloping site just seven kilometres from the CBD, said sales agent Zvon Mikulic.
“It was a person looking to build a dream home,” said Mr Mikulic of The Agency Perth.
“The emotional buyer ended up paying the most. They wanted it more than anyone else.”
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