Sydney house auction market rises as interest rates and taxes are cut

Fewer homes are going to auction this weekend, despite a rate cut and a Budget promising positive economic activity.

There will be 520 properties going under the hammer on Saturday, compared to last weekend’s 672, which was the second highest Saturday total recorded this year so far. Auction numbers this weekend will be well below the 736 auctioned over the same weekend last year.

Sydney’s inner west region is set to again host the most auctions, with 91, followed by the city and east with 68, the upper north shore with 60, the south with 58, the lower north with 53, the west with 37, the northern beaches with 36, the south west with 35, Canterbury Bankstown with 34, the north west with 23, the central coast with 13 and the Blue Mountains with one auction scheduled this weekend.

Randwick, Manly and Cammeray are the most popular suburbs for auctions this weekend in Sydney, each with eight scheduled. Next highest are Surry Hills, Rozelle and Marrickville, each with seven, and Epping, Darlinghurst and Lane Cove with six auctions each listed this weekend.

The Sydney weekend auction market recorded an encouraging result for sellers last Saturday despite the challenge of high listings following the end to the holiday distractions of the past month.

Sydney reported a clearance rate of 73.8 per cent last weekend, which was the highest result for the local market since the Easter break six weekends before. Last Saturday’s rate was higher than the 73.1 per cent recorded over the previous weekend but well below the boom-time 89.1 per cent recorded over the same weekend last year.

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.  

The bank has acted to stimulate an underperforming local economy, with growing concerns regarding the 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, is however 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 years’ results.

Dr Andrew Wilson is Domain Group chief economist

Twitter @DocAndrewWilson

My Property 2UE Fridays 2-3pm, Saturdays 12.30pm-1pm