Auctions bounce back to a 12-month high: What that tells us about the property market right now

It’s the best property market news that we’ve seen for a while – the auction clearance rates bouncing to a 12-month high across the combined capitals to reach a dizzying 64.8 per cent.

Following the traditional lull in January, the first signs of a recovery have been greeted with enthusiasm by industry insiders.

“That will always be a positive story,” said Melbourne buyers’ agent Mal James. 

“It is early days, but we feel the market is heating up, and the driver of the Melbourne market, Boroondara, is only growing in confidence.

“The latest clearance rates are good, but you have to remember they’re coming off an incredibly low base before Christmas when the rate was as weak as it was in the GFC. 

“So, any improvement is to be welcomed and we’re seeing Melbourne’s inner east going strongly and proving something of a leader.”

Domain’s latest Auction Report Card for the month of February found that clearance rates were above 55 per cent in all capitals, except Brisbane, with Sydney leading the way at 69 per cent, a 17 per cent improvement on January.

Adelaide followed at 68 per cent, up 21.6 per cent, then Melbourne at 63.8 per cent, up 10.5 per cent, Canberra at 58.2 per cent, up 9.2 per cent, and Brisbane at 51.5 per cent, an improvement of 20.7 per cent on the previous month.

The number of auctions in Perth, Hobart and Darwin were too low to produce reliable statistics.

Domain chief of research and economics Dr Nicola Powell was cautious about the clearance rate rises, feeling a sustained increase needed to be seen before too much optimism could be expressed.

“The improvement aligns with the post-January jump as auction listings begin to pick up after the lull of the school holidays,” she said. 

“At a time of declining property prices and worsening mortgage affordability, the performance of clearance rates will continue to be an important measure of the strength of the property market.

“Historically, clearance rates tend to bounce early in the year, and they are often higher than the previous year had closed, but it is too early to use this as a measure of green shoots within the property market, given the normal seasonal bounce that occurs in February.”

But Sydney buyers’ agent Rich Harvey of Propertybuyer believes that demand is beginning to pick up, despite the rises in interest rates, the tightness of credit and the lack of supply.

“We were successful last night for a client and we’ve been noticing that buyers have come back with a bit of an appetite,” he said. 

“That started happening in early February and then continued right through the month.

“The level of enquiry is high and there’s been an average of around three serious bidders at each auction, much less than COVID’s 10-plus, but we’re definitely seeing competitive buying. The market certainly isn’t as dire as some people seem to think. It’s growing in strength.”

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Across the combined regional areas, the auction clearance rate hit an 11-month high at 52.1 per cent. 

In both the regionals and the combined capitals, auction volumes have also risen for the first time since November but remain lower over the year.

Unit clearance rates outperformed houses in Sydney, Melbourne, Brisbane and Canberra, but in Adelaide – with a much lower number of apartments – houses sold better.

The market still appears very segmented, however, with the top end proving surprisingly buoyant, probably because of the more acute shortage of stock.

“Also, the demand for high-quality, well-finished homes for upgraders or downsizers in well-connected locations is strong,” said Harvey. 

“But the demand for B and C-grade property that’s underwhelming and unfinished and not renovated on inferior streets is much weaker.”

So much of it is about location, too, agrees James. “People selling in Boroondara sold well when they had priced their property correctly,” he said. 

“But for homes in Stonnington or Port Phillip, there has been some improvement, but they’re still borderline.

“Asian-Australian money likes Boroondara but, for example, not Bayside. But, overall, the market does feel like it’s on the move, and that’s always a very, very good thing.”