Weaker Melbourne market up and running after Cup break

The home auction market will resume at full gallop this Saturday after last weekend’s pause for the Melbourne Cup holiday break.

Although the distractions of the Cup usually result in relatively low auction numbers, last Saturday produced a solid day of activity with 490 homes listed to go under the hammer. This was a record Melbourne Cup weekend offering and well ahead of last year’s 132 auctions conducted over the same day.

Sellers are keen to engage a fading market, particularly with a flood of properties likely to deluge the market over the next seven weekends before the Christmas break. More than 8000 home auctions may be conducted in that period as the increasingly difficult search for a buyer intensifies.

This weekend Melbourne will host over 1000 auctions, well ahead of last Saturday’s total and higher than the 977 conducted over the same weekend last year.

Although Cup weekend auction numbers were predictably well below the previous weekends Super Saturday of 1479 auctions, volumes were nonetheless high enough to provide a reasonable insight into the underlying nature of the market. This weekend’s auction action will however provide a more robust insight into local market conditions.

Mount Waverley will be Melbourne’s most popular suburb for auctions this weekend with 22 followed by Reservoir 17, Glen Waverley 16, Mill Park 14 and many suburbs with 13 auctions scheduled including Epping, Richmond, Elwood and Brighton East.

Last Saturday Melbourne recorded a clearance rate of just 66.3 per cent, its lowest weekend rate since July 2012 – over three years ago – with the local spring market now clearly on the slide. The weekend result was below the 70.4 per cent recorded over the previous weekend and significantly lower than the 80 per cent recorded over the same holiday weekend last year.

Melbourne’s trend auction price fell last weekend reflecting a lower proportion of inner suburban home sales. The weekend trend price of $767,313 was lower than the $791,500 of the previous weekend but 3.3 per cent higher than the $742,500 recorded over the same weekend last year.

The weekend clearance rates have fallen sharply over spring so far and are now well below the results recorded at the beginning of the season. The Melbourne market opened with a 79.4 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 much closer to 60 per cent than 70 per cent.

Recent increases in home interest rates for investors and owner-occupiers have predictably buffeted buyer confidence generally. 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 Melbourne spring housing market as it enters the home straight carrying plenty of weight.

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