Strengthening of Auction Markets and new lows for RBA’s cash rate

There were 1,757 homes taken to auction across the combined capital cities last weekend, up from 1,427 over the previous week and 1,555 this time last year. Of the 1,433 results collected, 77% were successful, making it the highest clearance rate recorded since the week ending 1st March 2020.

Sydney in particular had 864 homes taken to auction, increasing from 700 over the previous week and 843 this time last year. The higher volumes saw the preliminary clearance rate hold strong at 79.6 per cent.

As well as strong auction results, Australian property prices as a whole seem to be on the rebound. According to the latest CoreLogic Home Value Index: home values rose 0.4% over October to a national median of $559,254. According to Tim Lawless, CoreLogic’s head of research, the gains over October were due to house price growth whilst unit prices remained weaker, most likely due to lower levels of investment activity, a high supply of unit-stock in inner-cities, and international border closures. Over the month of October too, regional areas continued to outperform their city counterparts, with values climbing 0.9 per cent.

The rise in prices has occurred despite a surge in new listings, suggesting strong buyer demand is apparent enough to absorb new supply. Nationally, the top end of the market continues to show greater price weakness than the middle to low end, which is supported by above average demand from first-home buyers.

The cash rate target has been cut by the RBA to an all time low of 0.1%. If passed on by the banks, which is highly likely according to Tim Lawless, we will see mortgage rates fall further from their already record lows. If history is anything to go by, cuts to interest rates usually fuel the housing market, causing upwards pressure on dwelling prices. With the trend in housing values already rising throughout the country, there is a good chance lower rates will create this momentum.

The main reason behind the RBA’s decision to lower interest rates is to ensure businesses are confident enough and willing to invest, and to encourage households to spend. These low interest rates, combined with federal budget initiatives and stamp duty concessions, will likely be enough to outweigh the wind down of fiscal support, like JobKeeper, and the expiry of home loan repayment deferrals.

If you would like to take advantage of these conditions right before we hit the end of 2020, please reach out to us!