Sydney auction market struggling as higher rates bite

The Sydney home auction market continues to buckle under the twin load of higher interest rates and record listings as increasingly anxious sellers rush to market with the year rapidly closing.

Sydney hosted a record spring day for auctions last weekend with 1083 homes listed to go under the hammer. Last Saturday’s total was the third highest ever recorded and just behind the all-time record 1128 set on the pre-Easter weekend March 28 earlier this year.

However, last weekend’s spring selling season auction record is set to be broken sooner rather than later this year as a deluge of auctions is due to flood the Sydney market. More than 6000 home auctions may be conducted over the next seven weekends before the Christmas break as the increasingly difficult search for a buyer intensifies.

About 1000 auctions are again listed this Saturday in Sydney,  more than the 943 conducted over the same weekend last year and yet another extreme test for the fast-fading local market.

Mosman will host the highest number of auctions of any of the Sydney suburbs this weekend with 16, followed by Killara 13, Manly 11 and many other suburbs with 10 auctions listed on Saturday including St Ives, Hurstville, Randwick and Turramurra.

The Sydney home auction market slid again last weekend reporting yet another year-low result, with the market continuing to track at its lowest levels since the spring of 2012. Saturday’s clearance rate of 63.4 per cent was below the 64.4 per cent recorded over the previous weekend and sharply lower than the 82.4 per cent recorded over the same Saturday last year.

Sydney has now recorded weekend clearance rates below 70 per cent on five of the past six Saturdays, the exception being the 70 per cent result of October 10.

Trend weekend auction prices continue to increase, reflecting the recent higher proportion of sales from inner suburban areas and lower sales volumes from the outer suburbs. The latest trend price of $1,150,000 is higher than the previous weekends $1,136,750 and 16.6 per cent higher than the $986,375 trend recorded over the same weekend last year.

Sydney’s weekend clearance rates have fallen dramatically over spring so far and are now significantly below the results recorded at the beginning of the season. The Sydney market opened with a 82.7 per cent rate on September 5 but on current trends and given the usual late spring seasonal pattern of declining buying activity, rates are likely to end the year well below 60 per cent.

Recent increases in home interest rates for investors and owner-occupiers have predictably buffeted fragile buyer confidence. The Reserve Bank has, however, decided this week 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. 

September jobless data was disappointing with the national unemployment rate above 6 per cent now for 16 consecutive months; the trend for home building approvals has now fallen for six months, lower than expected inflation data largely reflects a stagnant economy, the dollar remains seemingly intractable, the stockmarket has failed to make significant headway following sharp falls over recent months and dark clouds are now gathering over the international economy. 

And concerns of overheating housing markets in Sydney and Melbourne are clearly a thing of the past with prices growth now sliding fast.

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.

No relief from higher interest rates will present another hurdle for the Sydney spring housing market as it enters the home straight carrying plenty of weight.

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

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