Auction clearance rates in Australia’s two biggest cities drop to nearly two-year lows after the RBA’s surprise interest rate rise chills demand.
Auction clearance rates in Australia’s two biggest cities dropped to nearly two-year lows over the weekend after the Reserve Bank’s surprise interest rate rise chilled buyers’ demand.
Clearance rates in Melbourne, dropped to 61 per cent from 67 per cent the week before, according to the Real Estate Institute of Victoria (REIV).
In Sydney, they fell to 54.6 per cent from the previous week 57.5 per cent, according to Fairfax-owned Australian Property Monitors (APM).
The slump in Sydney and Melbourne brought clearance rates to their lowest levels since December 2008, according to REIV and APM, when the average standard variable interest rates reached a peak for that cycle of more than 9 per cent.
The RBA shocked home owners and prospective borrowers by lifting the official cash rate to 4.75 per cent from 4.5 per cent last week despite inflation remaining at modest levels.
That move added $46 onto the monthly cost of on a $300,000 mortgage, after earlier rate rises piled on an estimated $300 more in monthly repayments from October 2009 onwards.
“Buyers and sellers are unaware of what direction money policy will be,” REIV spokesman Robert Larocca said. “That sort of uncertainty is not good for the real estate market.”
“We had a clearance rate around 68 per cent for four months now, at the same time the spectre of a rate rise has hung over the market,” said Mr Larocca.
The average variable mortgage rate stands at 7.49 per cent, after Commonwealth Bank lifted their rates nearly double the RBA’s move - by 45 basis points – last week . CommBank’s three major rivals have yet to react.
Home prices have been tracking sideways in recent months, after posting gains of 1 per cent a month through 2009, fuelled by low interest rates and a cash stimulus by the government.
National city home prices rose just 0.1 per cent, seasonally adjusted, in September, according to RP Data-Rismark, taking the median city home price at $455,000.
According to the Australian Bureau of Statistics, the weighted average of eight capital cities rose just 0.1 per cent in the three months to the end of September.
While the low clearance rates over the weekend indicate uncertainty in the market, they haven’t dampened volumes of sales.
Next week in Melbourne 920 properties are up for auction, according to the REIV.
On the following two weekends, more than 1000 houses are listed for sale.
The market is not pricing in an interest rate next month when the RBA meets.
Story by Chris Zappone www.smh.com.au
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