Despite a decrease in the number of auctions, the Australian real estate market has managed to maintain its stability, thanks to high clearance rates and a slowdown in the decline of housing values. However, the market faces potential threats from rising interest rates and a possible slump in the retail sector
Last week, there were 2,050 homes put up for auction across the combined capital cities, marking a 15.6 per cent decrease from the previous week and a 31.2 per cent decline from the same period last year, according to CoreLogic. Of the 1,634 results collected so far, 70.3 per cent have been successful, indicating a high clearance rate.
Adelaide reported the highest preliminary clearance rate among the smaller capitals, with 80.8 per cent of auctions achieving a successful result, followed by Brisbane (63.0 per cent) and Canberra (51.9 per cent). However, none of the seven results collected in Perth were successful.
The Australian property market has managed to maintain higher clearance rates compared to late last year, indicating a flattening of the decline in housing values in most cities. Nevertheless, analysts remain cautious about the impact of rising interest rates and a potential slowdown in the retail sector.
Analyst Tarrc Brooker explains, “With a significant proportion of fixed-rate mortgages set to transition into higher rates in the coming months, I’m going to be keeping a close eye on the retail sector. From what I hear, we have already seen some signs of a slowdown, but it’s anecdotal and early days. I predicted that Christmas and Boxing Day would be a last hurrah for the Aussie consumer. Card activity data from Westpac suggests that may be the case.”
Le Bamblor counters this by saying, “I’m not disputing the reduction in borrowing capacity; I agree with you. I’m saying, however, that it is already reflected in the market pricing for property. People can’t borrow as much, hence can’t pay as much. But those are people now, right now. So it’s already reflected.”
Brooker also clarifies that a potential slowdown in the retail sector does not necessarily mean lower inflation. “The U.S. experienced a technical recession in 2022, and yet, inflation actually increased during that period. There is still so much inflation baked in here in Australia, the path back to 3 per cent remains challenging.”
Analysts continue to keep a watchful eye on rising interest rates and the potential downturn in the retail sector. Tarrc Brooker predicts that the retail sector is likely to slow down with a significant proportion of fixed-rate mortgages due to increase in the next few months. Anecdotal evidence has already hinted at such a slowdown, with the Christmas and Boxing Day sales season possibly being the last hurrah for the Australian consumer.
Stephen Koukoulas, Treasury Head of Global Strategy TD, Advisor to PM, and Speaker with Ode Management, highlights the continuing stabilisation in the Australian housing market. According to his analysis, the five major cities—Sydney, Melbourne, Brisbane, Adelaide, and Perth—have experienced either a 0.0 per cent or a -0.1 per cent drop in housing prices. This marks a significant shift in the market trend following a nationwide fall of just 0.1 per cent in February.
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