Sydney’s preliminary auction clearance rate dropped to 58.5 per cent on Saturday, Domain Group data shows, while Melbourne’s rate fell to 60.1 per cent.AMP Capital chief economist Dr Shane Oliver said the lag has narrowed as very high prices and debt-to-income ratios made the market more sensitive to interest rate changes.
Record-low fixed mortgage rates had been a key driver of the boom, Oliver said, making up a far greater share of lending than usually seen. But they had bottomed out last year and climbed rapidly since, reducing borrowing power ahead of any official cash rate hike.“New buyers are ending up with far less capacity to pay than a year ago, and that’s even though we’ve only seen one move by the RBA. I think the impact will show up a lot faster [as a result].
“The momentum leading into the tightening cycle will impact how quickly the [cash rate] hikes will show up … some of the other capitals have had quite strong momentum until recently, so [the market] might stay a little stronger there for longer, but certainly in Sydney and Melbourne we will see impacts on some measure like auction clearance rate straight away,” he said.
Rising rates reduce buyers’ borrowing and spending power, therefore reducing prices, Aird said. However, buyers were also likely to pull back on what they were prepared to spend on homes in a cooling market, and more may decide to sit on the sidelines as prices pulled back, resulting in further price falls.
“Market dynamics have shifted. It’s a different environment with fewer buyers, and people are now only moving if they have a legitimate reason [such as upsizing or downsizing], and are a bit more cautious,” he said.
Business Business Latest News, Business Business Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Source: smh - 🏆 6. / 80 Read more »
Source: GuardianAus - 🏆 1. / 98 Read more »