Auction clearance rates in Sydney and Melbourne are at their highest levels since the beginning of the downturn – but don’t expect property values to soar anytime soon.
That’s because new data from property analytics firm CoreLogic suggests the recent uplift in auction sales has been driven more by limited supply than a surge of new buyers entering the market.
Wakelin Property Advisory director Jarrod McCabe believes buyer demand won’t rise enough in spring to meet the seasonal increase in supply, meaning values won’t budge.
According to CoreLogic, the number of newly listed properties in July was down 22 per cent year-on-year, but the number of total listings – defined as the sum of new and ongoing listings – was comparable with recent winters, and higher than every July between 2014 and 2017.
“This shows you that stock levels are significantly down, but it also shows you that the quality of the stock isn’t all that great, as some of the properties that aren’t selling are hanging around for a long period of time,” Mr McCabe said.
“When you look at these statistics in conjunction with the clearance rates, it shows you that the increase in competition and clearance rates is more based around the supply levels than it is around the demand levels.”
The real test of the recovery will come in spring, when more properties are listed on the market.
Mr McCabe said buyer demand is unlikely to increase to a level that exceeded supply and fuels spike in prices.
CoreLogic’s senior research analyst Cameron Kusher said future changes in demand were too difficult to call.
“We’ve had two interest rate cuts, we’ve had some tax cuts, we’ve had the mortgage serviceability rules change, and all of that you’d think is going to be positive for the market,” Mr Kusher said.
“But on the other side of that, you’ve got comprehensive credit reporting, so I think generally lenders are going to be reasonably conservative.”
Two consecutive months of price increases in Melbourne and Sydney show that demand had increased somewhat, but tighter lending conditions meant “the recovery was going to be a very slow one”.
“And the RBA and APRA are still watching this very closely,” Mr Kusher said.
“I think if they saw a rapid recovery in the market, and they saw debt levels starting to rise again, they’d look at introducing macro-prudential policies to slow down that recovery.
“And we’ve seen over the past couple of years that those policies can be very effective.”
Investors Choice Mortgages director Jane Slack-Smith struck a more bullish tone, telling The New Daily that buyer sentiment had already turned a corner and the data was just playing catch up.
She said a significant spike in enquiries, together with the rise of lenders offering credit more easily than the major banks, suggested the market recovery would be stronger than Mr Kusher and Mr McCabe predicted.
“The number of enquiries we’ve had in the past four weeks is the highest we’ve had in over 18 months,” Ms Slack-Smith said.
Lenders such as Pepper, Liberty and LaTrobe Financial were lending loosely enough for these prospective buyers to raise the funds needed to buy a home, meaning the two consecutive months of price increases in Sydney and Melbourne were a sign of things to come, she added.
“We are already on the up climb,” Ms Slack-Smith said.
“So don’t wait for the starter’s whistle. It has already blown.”