Melbourne auction market faces year's biggest weekend

Melbourne will host the highest number of auctions for the year this weekend, providing the fading local market with another stern test.

The pre-Melbourne Cup Super Saturday of auctions traditionally provides high numbers of listings as sellers avoid the distractions of the following holiday long weekend.

This year will be no exception, with nearly 1500 homes likely to go under the hammer. Although it is the highest total this year, the number of listings falls just below the all-time record of 1558, auctioned over the same weekend last year. 

Relatively high numbers of listings have been a spring market feature, with 1233 auctions last Saturday, just below the 1240 listed over the previous weekend but well ahead of last year.

The inner east suburban area will host the most auctions on Super Saturday, with an extraordinary 230 homes listed to go under the hammer. Close behind will be the inner south with 221, followed by the inner city with 206, the west 203, the north east 190, the outer east 185, the north 114 and the south east with 86 auctions listed on the weekend.

The most popular suburbs for auctions this weekend are Glen Waverley with 27, followed by Mount Waverley with 24, Glen Iris and South Yarra each with 22, Hawthorn with 21, and Reservoir and East Hawthorn each with 20 auctions.

The home auction market weakened last Saturday, buyer activity falling in response to the announcement of higher home loan interest rates.

Last weekend was the lowest clearance rate of the year at 73 per cent, down from the 74.3 per cent reported the previous weekend and below the 76.4 per cent recorded over the same weekend last year.

The auction market has tracked back over the past two months, with clearance rates falling by nearly 7 per cent since the 79.9 per cent recorded on August 15. 

The decline in clearance rates over recent months follows the implementation of various so-called macro-prudential policies by financial regulators. These polices have resulted in higher interest rates for investors and also for Westpac owner-occupiers – as announced this month – with other banks almost sure to follow with similar rate increases.

Investor activity fell dramatically over July and August in all states according to the latest ABS residential loan data, and capital city home auction clearance rates have also generally fallen significantly over the same period.

Although the market fell at the weekend, results nonetheless generally remain in favour of sellers, with the local market now clearly the best performer of all the capitals.

Melbourne’s trend auction price fell again last weekend down from the previous weekend’s $783,250 to $774,250. The auction price trend has now fallen over four consecutive weekends and remains just 6.3 per cent higher than the $728,250 recorded over the same weekend last year.

The recent fall in clearance rates may impact both buyer and seller confidence, although the local market remains relatively robust. However, the spectre of higher interest rates challenging the housing market may be offset by a cut in official rates next month. Latest weak ABS jobless data for September surely adds to the case for a cut.

The seasonally adjusted unemployment rate remained steady at 6.2 per cent over the month despite a fall in the number of employed. Only a drop in the participation rate kept the jobless rate steady, as discouraged job seekers and retirees departed the workforce. The national unemployment rate has remained intractably above 6 per cent for 16 consecutive months.

Dr Andrew Wilson is Domain Group’s senior economist Twitter @DocAndrewWilson