Melbourne sellers rush to catch waning market

Another big weekend of home auctions will test a property market that has tracked backwards over recent weeks.

About 1300 homes are listed to go under the hammer on Saturday, well ahead of the 1073 auctioned last weekend.

Record auction numbers will continue to pressure the market until Christmas, with November 28 likely to break the all-time record for the highest number of auctions ever conducted on a Melbourne Saturday.

The most popular suburb for auctions in Melbourne this weekend is Reservoir, with 28.  

Several suburbs have 19 auctions scheduled, including Glen Waverley, East Bentleigh, North Balwyn and Essendon. Richmond will host 16 auctions on Saturday with 15 listed for Mount Waverley and St Kilda.

The home auction market recorded its second consecutive weekend of clearance rates below 70 per cent last Saturday, with a sustained late spring fade-out increasingly likely.

It recorded a clearance rate of 69.7 per cent and, although higher than the previous weekend’s Melbourne Cup holiday impacted result of 66.3 per cent, was the lowest full weekend result of the year so far.

However, last weekend’s rate was just below the 71.6 per cent result recorded over the same weekend last year, which signalled a similar late-season fade-out of buyer activity. 

However, this year’s post-Melbourne Cup market will be burdened by bank actions over recent months to raise interest rates for investors and by higher interest rates for owner-occupiers announced over the past three weeks.  

Higher interest rates can impact fragile buyer sentiment, particularly when the Reserve Bank offered no relief last week, deciding to leave official interest rates on hold over November despite a strengthening case for a cut over the past month.

Last weekend’s trend price of $765,750 was slightly lower than the $767,313 of the previous weekend but 4.9 per cent higher than the $730,000 recorded over the same weekend last year.

The Melbourne auction market is likely to continue to slide over the remainder of spring, with clearance rates ending up closer to 60 per cent than 70 per cent. The local market will nonetheless retain its mantle of the nation’s strongest capital city market, despite the burden of higher interest rates.  

The Reserve Bank has decided to leave official rates on hold at 2 per cent for the sixth consecutive month despite signs of a weakening economy over the past month. 

The bank decision to leave rates on hold will be disappointing for mortgage holders and prospective home buyers now grappling with higher interest rates, and to the retail sector looking for a boost in pre-Christmas sales in a fading economy.

Recent revelations of a downgrading of official forecasts for national economic growth will surely encourage the RBA to act sooner rather than later and cut rates, particularly given concerns that the recent increases of rates by banks may not have ended – with perhaps more to come.

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