What's happening to Canberra's auction clearance rate?

Canberra’s auction clearance rate dropped below 50 per cent for the second consecutive week, suggesting its strong run may have come to an end.

Preliminary Domain data shows Canberra’s clearance rate on Saturday was 41 per cent from 84 reported auctions. The previous weekend the clearance rate was 44 per cent.

Canberra’s October clearance rate of 55 per cent was the lowest monthly auction performance recorded since January 2017.

While Melbourne and Sydney have been in a downturn for the past six months with falling prices and clearance rates, Canberra has bucked the trend.

In the Domain September Quarter 2018 House Price Report, Canberra recorded an annual growth of 4 per cent in median house price, while Melbourne and Sydney dropped 6.5 and 3.2 per cent, respectively. But growth stagnated in the capital over the quarter.

Clearance rates have gradually declined in Canberra over the year but not at the same levels as Australia’s two biggest cities.

Domain senior research analyst Nicola Powell said a 60 per cent clearance rate represented the benchmark for auction performance.

“The Reserve Bank of Australia used 60 per cent as the benchmark for house price inflation, so when the clearance rate is above 60, it indicates we will see price growth but when they start falling below it means we will see a weakening market,” Dr Powell said.  

“In Canberra, particularly in the auction market, what’s occurring is we have seen a slide in clearance rates but this is happening nationwide with the fact we have fewer buyers in the market because borrowing capacity is lower.”

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Real Estate Institute of the ACT president Michael Kumm said the Financial Services Royal Commission made it harder for buyers to get a deposit within the time constraints of a typical auction campaign.

“Five years ago the norm was four-week marketing campaigns for auctions, but there were a lot of pre-auction offers which changed the market to see three-week campaigns,” he said.

“[But] we have noticed a 50 per cent reduction in the number of people coming to auction.”

Independent Property Group Inner North & City auctioneer Mark Larmer said various factors contributed to declining clearance rates in Canberra.

“It’s a combination of people thinking it’s the prime time to sell, banks restricting the lender criteria, which influences buyers price points, and negative media reporting there might be a crash,” he said.

Stock levels had rapidly increased since winter, and Mr Larmer said it had given buyers more choice.

“As clearance rates decrease week on week, the pool of available properties increases quite rapidly, homes that haven’t been sold are still on the market and are competing with new stock,” he said.

Mr Larmer said sellers had to accept the market had come down from its peak.

“We’ve seen things slow down really quick, but it’s not all doom and gloom,” he said

“Good properties are still going to sell because there will be buyer interest, as long as sellers realise there are different market forces influencing the values now as opposed to three months ago.

“Part of what’s happening is sellers aren’t accepting that – and it’s reflected in the low clearance rates. Sellers are adamant to sell for the price the home around the corner sold for three months ago.”

Mr Kumm said there was some uncertainty in Canberra with the looming federal election.

“The change of prime minister recently has almost certainly secured a change of government next year, and it always sends a shiver through Canberra,” he said.