Home auctions have become the latest part of the housing sector to report record growth this week, as the house price surge shows no sign of abating.
The national median price of houses sold at auction in the last month has gone up by 5.0% on the same period in 2020.
All areas saw some growth, but it was particularly profound in Brisbane, which had a 13.0% spike, and Sydney, which experienced a rise of nearly 10%.
Sydney topped the nation for highest auction prices in general, with a median price of just over $1.5m, ahead of Melbourne on $985,000.
Clearance rates were also up, with the number of homes going to auction and finding a buyer as high as 87.2% in Sydney and 88.2% in Adelaide.
These success stories were driven by both the buoyant housing markets and the unique nature of auctions, according to a leading industry economist.
“Typical auctions tend to be higher priced inner suburban properties,” said Andrew Wilson, Chief Economist at Archistar. “Auctions as a marketing technique do favour competition, where you have more than one buyer bidding in a competitive environment, which obviously maximises the price potential. That favour more inner suburban higher price areas, so we see auctions geared to those type of properties.”
“Given the nature of housing markets generally at the moment, auctioning has become more popular as a marketing tool because there are more buyers around and the competitive element is there. That's what's pushing up clearance rates and at the end of the day, that works its way into higher prices”
“I think we shouldn't be surprised at the way the year has begun because last year ended quite strongly. Once we moved out of lockdown, markets picked up quite quickly. I think it was more because lockdowns paused the opportunity to buy and sell rather than having any material impact on the underlying drivers of the market.
“With the economy improving that was a positive element, but that was a confidence issue than one that produced more buyers against what might have been fewer buyers with a worse economy. But the markets continued on from where they left last year, and the moment now is driven a little by the herd mentality and the fear of missing out.”
While prices are now surging across the sector, Wilson added that prices were likely to eventually slow as the gap between incomes and house prices grew.
“At the end of the day, it isn't a disorderly market, and in particularly in Melbourne and Sydney, house prices have increased strongly but are still where they were three years ago,” he said. “There's been no increase in three years and since then we've had lower interest rates and higher incomes, so affordability is in positive territory for now. As prices continue to rise, it will affect affordability, because we have flat incomes going forward and there's no prospect of lower interest rates. So it will eventually moderate, but in the short term, prices will grow.”