Australia's real estate auction clearance rates have fallen below 50%, dropping to a level not seen since the start of the COVID-19 pandemic. Property data firm Cotality reported that the national clearance rate fell to 47% last week, a marked weakening of one of the housing market's most closely watched indicators and a fresh signal that buyer demand is cooling.
Louis Christopher, the Managing Director of independent property advisory firm SQM Research, said the last time clearance rates sat at such a low point was the outbreak of COVID in March 2020. Before that, he noted, you would have to go back to the 2008 global financial crisis to find a comparable stretch of weakness in the auction market.
According to Christopher, what sets the current downturn apart is not the depth of the falls but their length. He said the market had been recording very weak auction clearance rates effectively since the middle of February, and that conditions had been getting worse and worse since then. Confidence among both home buyers and home sellers, he added, is now at a very low ebb.
The weakness appears to be broad-based rather than confined to particular suburbs. Christopher said a correction was now occurring across all of Australia's capital cities, with vendor asking prices falling in virtually all of them. He said he was not aware of any pockets performing notably better, with the possible exception of Darwin, which is holding up on the back of higher energy prices.
The managing director described a market that has absorbed a series of shocks in quick succession. These began with the interest rate rise in February, were followed by two further increases, and were compounded by the outbreak of conflict in the Middle East. He said last month's federal budget had also been a contributor to the souring sentiment, without being the sole cause.
The report noted that the slide had gathered pace in the wake of the federal budget handed down last month. It also pointed out that if the cooling market means fewer investors are competing against first home buyers, some observers regard that as a positive development for those trying to enter the market for the first time.
The figures underline how quickly sentiment has turned in a sector that has long been at the centre of national debate over housing affordability. With asking prices easing across the capitals and clearance rates at their weakest since the early days of the pandemic, the focus now falls on how deep and how prolonged the correction ultimately becomes.