Low auction clearance rates tipped to continue, according to Cotality

Less than half of properties auctioned across Australia sold last week, marking the third consecutive week with clearance rates below 50%. Cotality's preliminary national rate edged up slightly to 49.8%, an increase one expert deemed insignificant. These figures represent the lowest recorded rates since the COVID-19 market slowdown in 2020.

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It's pretty rare to see clearance rates this low.

Melbourne recorded the highest clearance rate at 54.5%, followed by Sydney (51.6%) and Canberra (50%). Adelaide's rate was 45.7%, while Brisbane saw a sharp decline to 23.8%, a significant drop from the previous week and a stark contrast to its leading 69.6% clearance rate at the same time last year. Most Australian capital cities then hovered between 63% and 70%.

Tim Lawless, Cotality's Asia-Pacific executive research director, stated that persistently low clearance rates signal a disconnect between buyer and seller expectations. He believes this indicates a market in a phase of negative movements, further influenced by June's significant monthly fall in national housing values. This decline followed the federal budget's limitation of negative gearing to new builds.

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Clearance rates persistently holding this low shows a mismatch between buyer and seller expectations.

Lawless cited several factors suppressing the market, including foundational challenges with affordability and serviceability, interest rate increases, and a pullback from investors post-budget. Additionally, a rising number of advertised property listings means buyers have more choices and negotiation leverage, removing urgency and contributing to the market's softness. He anticipates these low clearance rates will continue as the market remains in a downturn.

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It's probably another indicator of the market going through a phase of negative movements.

Munro Donen, director at Property Buyers, attributes the slowdown primarily to diminished investor interest, particularly after changes to negative gearing and capital gains tax. He believes sentiment needs a significant shift, as current feelings are "very, very low." Despite the overall drop, Donen noted that sales are still occurring in specific market segments for high-quality, well-renovated properties.

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Foundational challenges around affordability and serviceability, interest rate hikes, some pullback from investors post-budget, all those things combined are creating a softer housing market.