Melbourne auction market still robust as rates and taxes are cut

The Melbourne home auction market reported another healthy clearance rate for sellers last weekend despite hosting the highest number of April Saturday auctions on record. Numbers will be lower this Saturday but results are likely to remain similar to those recorded over recent weekends.

Over 900 homes are set to go under the hammer on Saturday which will be well down on last weekend’s record of 1263 but similar to the 919 auctioned over the same weekend last year.

Melbourne’s west will host the highest number of regional auctions this weekend with 144 followed by the inner south 140, the inner east 125, the inner city 122, the north east 114, the outer east 102, the north 80 and the south east with 48 auctions scheduled on Saturday.

Mount Waverley is the most popular suburb for Melbourne auctions this weekend with 23 followed by East Bentleigh with 18, Reservoir, St Kilda and Glen Waverley each with 13 and Craigieburn, Brighton and Glen Iris each with 12 auctions listed this weekend.

Melbourne reported a clearance rate of 75.0 per cent last Saturday which was just ahead of the 74.7 per cent recorded the previous weekend but well below last year’s boom-time rate of 82.0 per cent recorded over the same weekend.

The Melbourne rate was close to the weekend average recorded this year so far of 75.4 per cent from a market that continues to produce remarkably consistent results.

The Reserve Bank predictably decided to cut official interest rates this week to a new record low 1.75 per cent following 11 months with rates on hold.  

Bank has acted to stimulate an underperforming local economy with growing concerns regarding the future prospects of both the national and international economy. Latest ABS inflation data reflects a weakening economy with prices falling over the March quarter and the annual result now below the preferred RBA range of 2 to 3 per cent.

Lower official interest rates, if passed on by banks, however is positive news for mortgage holders and prospective home buyers.

Although official interest rates have been cut in May, the outlook remains fluid with further cuts still on the cards.

This week’s Budget announcement was also largely positive for economic activity although projections for growth, inflation and unemployment remain underwhelming and perhaps even slightly optimistic.  

Tax relief will act as a quasi pay increase for many wage-earners and business will also benefit from reductions in tax rates. Hopefully this will translate into higher consumer spending and investment generating economic growth.

The budget will have a largely neutral impact on housing market activity although it will certainly act to improve confidence generally.

Overall the Budget and rate cut are clearly positive for housing markets generally although price growth will remain largely modest in most capitals and for Sydney and Melbourne in particular, well below recent year’s results.

Dr Andrew Wilson is Domain Group Chief Economist Twitter@DocAndrewWilson