Australian capital cities marked their continued period of growth by topping 80% clearance rates in the first quarter of 2021.
Over 19,000 houses went to market across Australia in the first three months of the year, and according to experts CoreLogic, posted a series of records across several metrics.
When taken across all capitals, only 8 recorded have recorded more than 80% clearance rates, and four weeks of March constituted four of them. The last weekend of March was the highest ever recorded, with an 83.1% clearance rate.
With the housing boom continuing apace, the logical question that arises regards just how long this can go on for.
“I don’t think anyone can confidently say exactly when this exuberance in the housing market will end, but as with all previous upswings, it will taper,” said Eliza Owen, Head of Research Australia for CoreLogic. “While monetary policy remains very accommodative for asset value increases, the deposit hurdle will start to see some first time buyers pushed out of the market, and the RBA have indicated the council of financial regulators (which includes ASIC, APRA, RBA and Treasury) will be keeping an eye on levels of household debt, and other metrics signifying the level of risk in the mortgage lending space. Any policy that slows the flow of credit for housing would likely have a dampening impact on property values and the auction clearance rate.”
As clearance rates rise, experts are now questioning whether there is a logical ceiling to the auction market, at which buyers will realise that the value of the auction format is exhausted and a premium may develop on off-market sales.
“I think there are some assumptions there that auction as a method of sale delivers a price premium, which I have read to only be true in a rising market, and have not tested the idea myself, so it’s kind of tricky to answer,” said Owen.
“However, what I would say is auction volumes and clearance rates fluctuate with housing demand. Presumably auctions being viewed as a poor value option to purchase would signify demand constraint on the part of the buyer, such as affordability constraints creating an unwillingness to pay, which would naturally see lower auction volumes and lower clearance rates. So in that sense yes, there is a limit to the amount of time that auction clearance rates can see very high levels.”