Melbourne’s auction clearance rates are as low as they were in August 2021, during COVID-19 lockdown.Agents say buyers are now trying to predict the bottom of the market, but that this is impossible to do.Melbourne’s auction market has fallen to its weakest level since August last year, when the city battled through its sixth COVID-19 lockdown, new data shows, and experts predict it will drop further as interest rates rise.
“We do expect to see a greater decline in clearance rates, which we have already seen since interest rates have been moving higher,” Powell said. “It’s not the only thing causing the market to slow, there have been affordability issues and an increased number of homes for sale, but it has been fuelled or accelerated by rate rises and a more wary market sentiment from buyers.”
During that downturn, house prices fell by 10 per cent in Melbourne, from a peak at the end of 2017 to a trough in mid-2019.Commonwealth Bank head of Australian economics, Gareth Aird, said interest rate hikes meant clearance rates would continue to decline, though he would not make any predictions on how low they would go.
“I think generally they [clearance rates] will hit a floor. A lot of people that are selling will see the market is falling and accept a price they may not have otherwise to get the job done,” he said.Auctioneers and agents say they have to work much harder to get a sale across the line. “For many people, especially new buyers, this is the first time they’ve experienced interest rate rises and it’s affecting how much they can borrow,” McCarthy said. “Wages are not keeping pace with interest rate rises so it’s restricting the capacity in the first-home buyer end of the market, especially those who are stretching to get there.”The rate rises were not affecting those at the higher end of the market, or who had good equity in other properties, he said.