The property market continues to cool as both volumes and clearance rates decline, with some potential price falls on the horizon as would-be buyers back off due to higher interest rates, experts say.
Much of the cooling has occurred in high-end markets, with these experts saying buyers are no longer willing to purchase prestige properties for overheated prices due to difficulties in obtaining finance.
Real Estate Institute of Australia president David Airey says auction results are the first indicators of a cooling market, and the effects should spread over the rest of the year.
“We are seeing what is happening to the market right before us. The market is slowing, not only in volumes but also in clearance rates,” he says.
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“The high-end has certainly dropped off, and that is partly due to difficulties in obtaining money. The banks are just making it a little harder to obtain finance, but I think we’ll see that spread across the market with first home buyers disappearing.”
Airey also says prices could fall if consumer sentiment and global economic conditions remain poor.
“Unless there’s a significant change in the overall market, there will be low confidence. The market has turned very quickly, and I think we can trace it back to the Easter break.”
Matthew Bell, economist at Australian Property Monitors, says the weak auction results confirm the market is beginning to cool after some hectic growth – relieving some fears of a bubble.
“I think falls in housing finance, consumer confidence falling and coupled with the unexpected economic eruptions from Europe, I think all these factors are coming together at the one time.”
But while Bell says there could still be some falling prices, he believes they will be contained to certain areas and a pricing plateau is more likely.
“I would be surprised if we see some falls city-wide, I think we’re going to see some pockets of price falls in areas that have been affected the most. But overall, I’d be surprised to see wide-spread falls.”
“But it does depend where interest rates move. I think the RBA is going to watch for a little while, and there might not be any rises for some time. At least, nothing as fast as we’ve seen in the last six to nine months.”
Real Estate Industry of Victoria chief executive Enzo Raimondo said in a statement the market is more “in balance” than it was last year, and that “buyers are facing the best conditions in over a year”.
“This is likely to continue with over 1,000 auctions the weekend after Queens Birthday,” he said.
Melbourne, the nation’s hottest property market, recorded 855 auctions over the weekend with a 70% clearance rate. While Raimondo said this was a good result, both Airey and Bell say this indicates the market is beginning to shrink.
In Sydney, 341 properties were put on the market with 259 sold, indicating a clearance rate of 70%. Total sales reached $184 million.
In Brisbane, only nine properties were sold out of 16 on the market, indicating a clearance rate of 56% with total sales at $4.7 million. In Adelaide, 18 properties sold out of 30, a clearance rate of 60%, with total sales of $12 million.