About 40 per cent of the country’s real estate auctions were withdrawn over the weekend as stricter social-distancing measures announced by Prime Minister Scott Morrison to fight the coronavirus pandemic slowed down property market activity.
- There were 3,203 homes scheduled for auction across the combined capital cities
- But 40 per cent were pulled from the market
- The preliminary auction clearance rate dropped to 51.4 per cent
Social-distancing rules introduced by the Federal Government last week include a ban on auction gatherings and open homes, forcing agents to instead undertake online auctions and private sales mostly negotiated by phone.
After meeting with state and territory leaders on Sunday night, the Prime Minister said the previous gathering limit of 10 people had been cut to two.
Real estate agents say it will take some time for the market to adjust to this new reality.
In the meantime, the property market, like the rest of the economy, is taking a big hit, with the number of Australians struggling to repay their mortgages expected to lift to higher levels than seen during the global financial crisis.
One economist warned that Australia could see unemployment reach about 10 per cent and house prices drop 20 per cent.
Auction clearance rate dives to lowest level since June
The past week was set to be the busiest week of the year with 3,203 homes scheduled for auction across the combined capital cities, the majority in Melbourne and Sydney.
But of those, 40 per cent were pulled from the market, CoreLogic said, with the withdrawal rate up from 7.5 per cent the previous week.
The preliminary auction clearance rate dropped to 51.4 per cent — the lowest level since June 2019.
This compares to the previous week when the clearance rate was 56.9 per cent across 2,599 auctions.
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At this time last year there was a 50.9 per cent clearance rate across 2,164 auctions.
“Overall, we are expecting a substantial drop in new property listings, regardless of the selling method, as buyers and sellers retreat to the sidelines and wait for some certainty to return to their decision making,” CoreLogic said.
“Some vendors will choose to convert their listing to a private treaty method, while others will likely pull their property from the market altogether until confidence and selling conditions improve.”
The proportion of properties sold prior to auction, lifted from 22 per cent to 36 per cent over the past week.
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CoreLogic said it expected the number of withdrawn auctions to rise in coming weeks, but the final clearance rate to adjust lower.
It said once agents have time to adjust it could be that methods such as online or over-the-phone solutions would become a successful replacement to traditional auctions.
To date there had been “a rapid transition to online auction formats”, but some agents reported technical challenges and connectivity issues.
“No doubt many of these challenges will be resolved with the benefit of more time to prepare,” CoreLogic said.
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Melbourne, Sydney clearance rates fall, prices expected to follow
In Melbourne, a preliminary auction clearance rate of 58.6 per cent was recorded across 1,517 auctions.
This compares to the week prior when there were 1,343 auctions returning a final clearance rate of 58.4 per cent, and one year ago, when the clearance rate was 52.1 per cent across 978 auctions.
The preliminary numbers show 32 per cent of Melbourne auctions were withdrawn from the market.
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In Sydney there were 1,263 auctions scheduled, of which 385 had been confirmed as withdrawn so far, for a preliminary clearance rate of 47.3 per cent.
In comparison, there were 946 auctions held in the week prior and the final auction clearance rate was 58.8 per cent.
One year ago, 801 auctions were held in Sydney and the clearance rate was 54.3 per cent.
NAB’s David de Garis, director, economics, markets, said there were very large falls in both buying and selling enquiries last week.
“CoreLogic reports that the demand for their Comparative Market Analysis reports, reports sought by agents ahead of property listings, fell a further 38 per cent in the week to 25 March,” he said.
“This meant requests were down 20 per cent on year earlier levels when the property market was in a downturn.
“It’s hard to see buyers and sellers as anything other than very cautious until there is more clarity about COVID-19 and what it means for social distancing, the economy and job market conditions.
“There are already signs that the rate of increase in eastern seaboard prices is slowing.”
CoreLogic’s monthly house price statistics will be released on Wednesday.
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