Australia’s property market is in free fall, with auction clearance rates plunging to levels last seen at the start of the pandemic more than two years ago.
Just over half of homes sold above reserve over the weekend, with major banks expecting the Reserve Bank of Australia to raise interest rates again on Tuesday by 0, 5 percentage points.
In Australian capitals, just 55% of homes put up for auction actually sold – marking the worst preliminary clearance rate since April 2020, according to data from CoreLogic.
This marked a sharp drop from the clearance rate of 59.8% in the previous week.
The auction approval rate was significantly lower than the 72.1% level recorded a year ago.
Canberra saw the most dramatic decline with its auction clearance rate in one year falling to just 51.2% from 87.9%.
In Australian capitals, just 55% of homes sold went to auction – marking the worst preliminary clearance rate since April 2020, according to data from CoreLogic (pictured is an auction in the Brisbane suburb of Coorparoo in 2020)
The cost of living continues to soar in Australia as auction clearance rates plummet. Pictured: Residents of Perth
Auction clearance rates plunge from a year ago
SYDNEY: Decrease from 70.5% to 52.5%
MELBOURNE: Decrease from 73.1% to 56.8%
BRISBANE: Decrease from 63.3% to 43.8%
ADELAIDE: 71.3% versus 78%
CANBERRA: Down from 87.9% to 51.2%
PERTH: Up to 50% from 33.3%
Brisbane, until recently Australia’s best performing capital market, saw its win rate fall to 43.8% from 63.3%.
Sydney’s auction clearance rate plunged to 52.5% from 70.5% a year ago.
On the city’s northern beaches, the auction resolution rate fell to just 46.5%, while in the eastern suburbs it was only 41.5%.
In Melbourne, it fell to 56.8% from 73.1%.
Adelaide’s decline was only moderate, falling from 78% to 71.3%.
Perth bucked the trend, with its win rate rising to 50% from a particularly low 33.3% a year ago.
Commonwealth Bank, Australia’s biggest property lender, expects house prices to fall 6% in 2022 and then another 8% in 2023.
The ABC also expects the Reserve Bank to raise interest rates by half a percentage point on July 5, taking the cash rate to a three-year high of 1.35% from 0. .85%.
A 50 basis point rate hike would see a Commonwealth Bank borrower, with an average mortgage of $600,000, pay an additional $163 per month in home loan repayments, with their variable rate rising from $2,495 to $2,658 to reflect the increase in RBA.
Sydney’s one-year auction clearance rate has fallen to 52.5% from 70.5% (pictured is auctioneer Karen Harvey at Hurlstone Park in May 2021)
Big banks expect another big rate hike in July
COMMONWEALTH BANK: Up 0.5 percentage point to 1.35%
WESTPAC: Up 0.5 percentage point to 1.35%
NAB: Up 0.5 percentage point to 1.35%
Westpac and NAB also expect a 0.5 percentage point increase on Tuesday.
RBA Governor Philip Lowe expects inflation to hit 7% by the end of 2022 for the first time since 1990.
Headline inflation in the year to March jumped to 5.1%, the fastest pace since 2001, and well above the 2-3% target of the RBA.
Commonwealth Bank and NAB expect the cash rate to reach 2.1% by November, while rival Westpac forecasts a cash rate of 2.35% by February 2023.
ANZ forecasts a cash rate of 2.25% by May 2023.
With more rate hikes expected to fight inflation, Australians are unenthusiastic about a succession of monthly rate hikes.
A Canstar survey of 1,001 Australians, including both borrowers and savers, showed that only 39% backed the RBA’s decision to raise rates to fight inflation, compared to 37% who believed the rates were rising too quickly and 25% who were unsure.
The Reserve Bank of Australia is expected to hike interest rates by half a percentage point on Tuesday (pictured is auctioneer Jesse Davidson at Strathfield in Sydney in May last year)
The quarter-percentage-point rise in the RBA in May marked the first rate hike since November 2010 and ended the era of the record high cash rate of 0.1%.
The value of national home loan approvals for homeowners in May was 9.7% lower than a year earlier, according to data from the Australian Bureau of Statistics released on Monday.
A follow-up RBA increase in June of half a percentage point marked the largest monthly increase since February 2000, taking the cash rate to 0.85%.
Baby boomers, who faced interest rates of 17.5% in the early 1990s, are ironically the group most supportive of the RBA’s aggressive rate hikes.
Canstar financial expert Steve Mickenbecker said baby boomers, those born between 1946 and 1965, were now more likely to live off their bank savings.
“Many baby boomers who are likely to live at least partially off interest income and fight inflation on a fixed income, lean on the positive side with 46% of those in their 60s supporting the rapid pace and succession rate hikes,” he said.
What a 0.5 percentage point rate hike in July means for borrowers
$500,000: Up to $136 from $2,079 to $2,215
$600,000: Up to $163 from $2,495 to $2,658
$700,000: Up to $191 from $2,910 to $3,101
$800,000: Up to $218 from $3,326 to $3,544
$900,000: Up to $245 from $3,742 to $3,987
$1,000,000: Up to $273 from $4,157 to $4,430
Monthly repayments based on the popular Commonwealth Bank floating rate rising from 2.89% to 3.39% if the Reserve Bank cash rate in July drops from 0.85% to 1.35%