Auction clearance rates dropped almost 10 percentage points this weekend after nervous buyers spurned large public gatherings.
Property analytics firm CoreLogic described the results as a “turning point in buyer and seller sentiment” but said prices had so far held firm.
“The latest results highlight the housing market is being impacted by the social distancing measures and weaker confidence related to the coronavirus pandemic,” CoreLogic auction commentator Kevin Brogan wrote in his auction note.
“To date there is no evidence of reduced housing values, however it is clear that transactional activity will be temporarily disrupted [over the] coming weeks and months.”
The number of homes that went under the hammer (2539) was up on last week’s (2220).
But the withdrawal rate jumped to 8 per cent as vendors thought twice about selling in the current climate – well above the year-to-date average of roughly 5 per cent.
Sydney experienced the highest number of auction withdrawals.
After a surge in new coronavirus cases, 13.5 per cent of auctions were abandoned in the Harbour City, compared to just 3.9 per cent in Melbourne.
Sydney returned a preliminary clearance rate of 64.4 per cent from 923 auctions, significantly lower than last week’s 74.6 per cent from 749.
Meanwhile, Melbourne recorded a success rate of 62.7 per cent from 1317 auctions, down from 70.1 per cent from 1173 auctions.
Although much lower than the highs of recent weeks, the preliminary clearance rates across the two largest markets and other capital cities were much stronger than this time last year.
And homes still sold for eye-watering sums.
An “unliveable” deceased estate property in Thornbury, Melbourne sold $130,000 above reserve for more than $1 million on Saturday, according to Domain.
The young couple who bought the two-bedroom house said they were worried about the unfolding economic crisis but had been searching for a property for more than six months.
And a three-bedroom apartment in Elizabeth Bay, Sydney sold through Richardson&Wrench for $4,225,000 – $750,000 above its reserve.
It was Sydney’s most expensive disclosed sale.
Elsewhere, Melbourne’s most expensive confirmed sale was a five-bedroom, five-bathroom house in Albert Park ($9,010,000), and Canberra’s was a five-bedroom, four-bathroom house in Griffith ($3,340,000).
Despite the strong results, analysts expect challenging times ahead.
The growing likelihood of a major recession and subsequent rise in unemployment is weighing on consumer sentiment and making it harder to close sales.
AMP Capital chief economist Shane Oliver warned on Thursday that house prices would fall by 5 per cent if unemployment rose to 7.5 per cent – winding back most of last year’s gains.
His comments came before the Reserve Bank and federal government announced a collective support package of up to $189 billion to “cushion the blow” of unemployment and prevent a large job losses.
“A sharp rise in unemployment to say 10 per cent or beyond risks resulting in a spike in debt servicing problems, forced sales and sharply falling prices,” Dr Oliver wrote in a note to clients.
“This could then feed back to weaken the broader economy as falling home prices lead to less spending and a further rise in unemployment and more defaults and so on.
“This scenario could see prices fall 20 per cent or so.”