Sydney property slowdown bites as auction clearance rates tumble to the lowest in a decade
Sydney’s housing market is facing the toughest conditions since the global financial crisis after auction rates slumped again at the weekend, with analysts predicting that the slowdown could get much worse in the months ahead.
Australia’s biggest city saw only 44 per cent of 567 listed properties sold at the weekend, according to Domain, the lowest preliminary clearance rate for a decade. The figure is likely to be revised down below 40 per cent, a level of downturn not seen for a decade.
The last time rates were in the 30 per cent range was November 2008, at the peak of the global financial crisis. The two instances before that were May 2004, when New South Wales introduced vendor stamp duty, and July 1989, when interest rates were 17 per cent.
The decline in the property market, which AMP’s chief economist, Shane Oliver, thinks could fall 20 per cent before bottoming out in 2020, has been most marked in Sydney where prices are down around 6.3 per cent from the peak in 2017 as buyers drop out owing to tougher credit standards and falling confidence.
The clearance rate in Melbourne at the weekend was below 50 per cent on a much greater number of properties (nearly 1,000).
The news comes as Commonwealth Bank reported on Monday that economy-wide spending on all goods and services is growing at its slowest rate for 16 months, according to its monthly business sales indicator. It blamed falling home prices and higher mortgage rates, along with higher petrol prices, for the moderation in spending, which grew just 0.2 per cent in September.
Property analysts now believe the situation will get worse before it gets better.
Domain’s senior research analyst, Nicola Powell, said: “I think this is what we are going to see for Sydney for the rest of the year. The slowing nature of the auction market suggests the downturn has yet to hit a peak with further price softening ahead.”
Andrew Wilson, chief economist at My Housing Market, said sellers were now facing the “toughest market conditions since the economic shock of the GFC flattened activity 10 years ago”.
Wilson, a former chief economist at Domain, has joined ranks of high-profile forecasters such as Oliver, who are now predicting more trouble ahead.
Damian Collins, managing director of Momentum Wealth in Perth, said the lending constraints imposed on the banks by regulators and in the wake of the royal commission into financial services was having far greater impact than first thought.
“Affordability was stretched in Sydney and Melbourne when credit was high,” he said. “But now it’s harder to borrow money.
“People just can’t borrow what they used to be able to and I think the government will have to allow the banks to loosen their credit otherwise Sydney and Melbourne could see significant falls.”