Big test for property market amid uncertainty ahead of Budget

Sydney will host its second highest Saturday of auctions this year, which will fully test the local market that bounced back with a better result last weekend.

Almost 700 homes will go under the hammer this weekend, well ahead of last weekend’s Anzac Day total of 426 and similar to the 697 auctioned over the same weekend last year.

All eyes will be on the Federal Budget announcement next week, with housing markets sensitive to outcomes in regard to spending initiatives or possible public service job and service cuts, and changes to taxation policy.

Tuesday’s Budget announcement will coincide with the monthly decision on official interest rates settings from the Reserve Bank. Although likely to remain on hold for the 12th consecutive month, the case is growing for a near-term cut.

The Reserve Bank may decide on a pre-emptive strike to support a weakening economy before the banks act unilaterally to raise rates and before the distractions of the forthcoming election campaign, which will begin in earnest following the Budget announcement.

The peak of the home building cycle appears to have passed and the trend for retail sales is falling. The dollar remains too high and concerns regarding overheating housing markets are now clearly fanciful with Sydney house prices falling sharply over the past six months.

Although the jobless rate has improved recently this measure tends to be a lagging indicator of economic health and recent improvements have largely come from increases in part-time work. The latest weak inflation data reflects a stagnating economy.  

Sydney’s inner west is set to host the most number of auctions with 109, followed by the city and east with 93, the south 89, the upper north shore 77, the lower north 63, the west 53, the northern beaches 46, the south west and Canterbury Bankstown each with 40, the north west 25, the central coast 20 and the Blue Mountains with three auctions scheduled.

Mosman is the most popular suburb for auctions in Sydney on Saturday with 13, the next highest is Surry Hills at 10, followed by Blacktown with nine, Randwick with eight and several suburbs with seven auctions scheduled, including Strathfield, Eastwood, Neutral Bay and Croydon Park.

The Sydney weekend home auction market rebounded last Saturday despite the distractions of the holiday weekend and a rise in listings.

Sydney reported a clearance rate of 71.2 per cent last Saturday, higher than the year-low 67.7 per cent recorded the previous weekend and the best result for three weekends. 

Despite the improvement, Sydney’s average weekend auction clearance rate since Easter of 70.7 per cent remains well below this year’s pre-Easter average of 75.1 per cent.

Regional clearance rates were more consistent last weekend with a rising trend in the recent underperformers in outer suburban areas. Results in the inner suburbs remain strong and well ahead of the other regions. 

Dr Andrew Wilson is Domain Group’s chief economist.

Twitter @DocAndrewWilson 

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