Consistently high auction clearance rates throughout September has been greeted with cautious optimism by agents, investors and economists. Auction clearance rates in Sydney have consistently exceeded 70% which is a far cry from clearance rates of even a few months ago. Similar clearance rates have been experienced in Melbourne as well.
The revival in clearance rates has seen some recovery in house prices from the low points of mid winter and while some historical data suggests that the current clearance rates will lead to a spike in property prices, there are several factors in play which may keep housing prices in check to some extent. These factors include:
- Historically low numbers of properties available for sale – which is having some effect upon the supply and demand dynamics of the market. A sudden surge in availability of property may put the brakes on clearance rates. There is no doubt that the rise in clearance rates may encourage more sellers but as the prices are still relatively low, this increase is expected to be steady rather than rapid.
- Bank lending criteria appears to remain tight with some evidence that the new credit reporting standards are having a negative impact upon approvals. Anecdotal evidence suggests that banks are having a difficult time meeting normal settlement dates which would suggest that their internal mechanisms are struggling to cope with meeting all necessary criteria.
Despite these dampeners, many industry leaders are hopeful that we may have seen the worst of the property market slump. They point to data that suggest investors are reentering the market (Westpac approvals for investor loans are up 5%)and a rise in home lending approvals of 8% as well as the improved auction clearance rates to support their optimism.
While may be too early to clearly see what the long term outlook is for the residential property market in particular, there are some key take aways from the latest data surrounding auction clearance rates for both residential property investors and first home buyers. These are:
- The market may have bottomed out and there are likely to be some good property purchasing opportunities available in the coming months
- Interest rates are still at historical low levels. If prices begin to rise again, the RBA may in time have to look at raising rates – although the likelihood of this occurring in the short term is relatively low.
- Banks seem to be struggling to meet demand with some evidence suggesting that they are having difficulty getting to settlements on time.
All of these factors make it imperative for prospective borrowers to do their homework now and to be prepared to get back into the market. One great way to circumvent some of the potential pitfalls in a rising market s to engage the services of Australian Finance Hub to prepare mortgage applications and source the best available deals in the market. Should you have any enquiries in relation to obtaining finance in the housing market please don bot hesitate to give us a call.