Lower auction levels signal possible slowdown

Here's what brokers need to know

Lower auction levels signal possible slowdown

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Auction levels could provide a glimpse into what's happening in Australia's larger property market. 

Last week, CoreLogic released data showing that both auction levels and clearance rates were down across the country, compared with the same time last year. 

According to the research firm, there were just 440 auctions in the combined capital cities, during the week of January 26, a decline from last year's 476, while the clearance rate fell to 64.5%, down from 67.2% a year ago. 

The data points to what some say is likely a slowdown of the broader market, amid higher-for-longer interest rates and flatlining property prices, as some sellers pull their homes from the market. 

"We're definitely seeing a slowdown in house prices. There's been a flattening in the last few months in the market," Aaron Bell (pictured), a mortgage broker at Home Loan Village in Sydney, told Australian Broker. "People say, 'My neighbor sold their home for $3 million last year, so I should get $3.1 million for mine.' Then people pull their homes from the market. There's an emotional side to selling. And vendors won't accept the new market conditions."

Bell added that the tendency for existing homeowners to wait to sell will likely continue until interest rates are lowered. 

"The rate cuts impact the perception of future affordability," Bell said. "It's adding more confidence to the market. And confidence is a huge factor in demand.

"When rates come down, borrowing capacity increases, so more and more people are competing for properties," he said. "Price points increase if there's more demand for property, but the supply stays the same." 

That's good news for existing homeowners and will likely increase not only auction levels, but general market optimism, he said. 

But others caution that the data is more nuanced, with the December-January holiday period historically being slow. 

"School holidays only just wrapped up. So we’re expecting activity to pick up in the coming weeks," said Christian Stevens, cofounder and chief executive officer of Sydney-based brokerage Flint Group. "Buyer demand remains strong, especially in premium suburbs where stock is tight and well-priced properties are still attracting competition. That said, if auction numbers stay low and clearance rates soften over the coming months, that could indicate a broader shift. But for now, this looks more like a market adjustment rather than a downturn."

What brokers need to know

Either way, brokers need to prepare for a possible slowdown, which would lead to fewer potential buyers. 

"The borrower is going to go to the broker that communicates the best," Bell said. "As a broker, you need to understand what your regular borrower is thinking at the moment and what questions they have and be able to answer those questions. If you can answer those questions, then you're going to win." 

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