Auction clearance rates have hit 59.9 per cent on the back of on-site auctions resuming in New South Wales last week – the highest clearance rate result since strict social distancing measures were rolled out across Australia.
According to CoreLogic, the clearance rate for the week ending 10 May was up from 47.5 per cent the previous week and a significant increase from an all-time low of 30.2 per cent just four weeks ago, although the number of auctions held last week was almost 80 per cent lower.
Sydney recorded the highest clearance rate of the capital cities at 66.3 per cent, followed by Melbourne with 56.5 per cent.
However, the auction clearance rate had been improving since the week ending 19 April, as the industry adapted to social distancing measures and over the past few weeks, there was reduced downward pressure on the clearance rate, because fewer auctions were scheduled, and less auctions were subsequently withdrawn.
On-site auctions are set to resume in most other states and territories this weekend, and CoreLogic Head of Research Australia Eliza Owen said there were several other real estate indicators showing improvements over the past week, including a 6 per cent increase in the number of new CMA reports generated in the week ending 10 May
“These indicators of improved buyer and seller activity come as consumer sentiment has made significant gains,” Ms Owen said.
The Westpac-MI Consumer Sentiment Index went from a recent low of 75.6 in April, to 88.1 in May. The index had recovered 80 per cent of the loss it had made in the month of April. The ‘time to buy a dwelling’ component of the index increased 31.8 per cent over May.
But Ms Owen said despite the gains in consumer sentiment, serious challenges lay ahead for the Australian economy and housing market demand.
“As noted last week, there are some efficiencies to easing restrictions on property inspections, and holding on-site auctions, but it is not enough to make up for the 7.5 per cent of employed positions that have been lost, or the 8.2 per cent decline in wages paid, as reported by the ABS,” she explained.
“These significant changes to jobs and income will constrain housing demand in the year ahead.”
She said another shock to housing demand is the frozen flow of people to Australia.
The latest overseas arrivals data from the ABS showed a 98.5 per cent drop in visitors to Australia over April.
April estimates suggest 5,460 new arrivals to Australia, off the back of a 12-month average of 761,912. Combined with departures, there were 52,790 net departures from Australia over the month.
“With slowed demand and a significant economic contraction playing out across Australia, we cannot confidently expect a turn-around in the housing market until certain economic indicators improve,” Ms Owen said.
“The cash rate is highly unlikely to be reduced any further.
“This means it will take an improvement in employment and incomes to see increased purchasing capacity, which would support growth in the housing market.”
