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CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Sunday, 10 May 2015

Sydney auction records continue

Auction records falling

Sydney's auction market continues to break records.

Domain Group reported an extraordinary preliminary clearance rate of 89.2 per cent on Saturday, the highest on record.

Even allowing for the fact that this figure will doubtless be revised down as the full range of results are reported, this is still a stunningly high result.

The median price of Sydney properties reported as sold on Saturday was $1,015,000.

Rate cuts impacting market

Importantly this red hot auction market as yet fails to take into account of the full impact of the landmark interest rate cut to just 2 per cent on May 5.

Modelling by the Domain Group has shown the cumulative impact of interest rate cuts on quarterly average auction clearance rates which have continued to rise from 51.6 per cent in Q4 2011 to more than 80 per cent in the first quarter of 2015.

Although there is some way to go yet in the second quarter there is every indication that this could be the hottest ever 3 month period for auction results in the harbour city.

Growth rates

Historically one might have assumed such rampant auction clearance rates to have been commensurate with capital growth ripping higher at a 20 per cent annualised pace.

Arguably such projections should be revised down today given that the market is coming from a higher base.

Yet any way one chooses to look at it two interest rate cuts in the first half of 2015 will undoubtedly lead to the price gains in Sydney smashing all expectations for the calendar year.

CoreLogic-RP Data's Home Value Index has recorded mid-year declines for each of the past three calendar years, and it is expected that this will most likely be repeated through May and early June.

Nevertheless, the longer run chart shows that Sydney's market is recording annualised price growth at comfortably above double digit pace.

Around the traps

Over the past 12 months Sydney, Melbourne and Brisbane have each recorded capital gains, but Adelaide and Perth are now in the red, albeit moderately so.

Melbourne's market seems to have responded to renewed monetary easing with some solid auction results recorded.

Adelaide has been hampered by a subdued labour market, with manufacturing positions continuing to go.

The Brisbane and Gold Coast region is a classic two-speed market.

A number of inner Brisbane suburbs have recorded robust capital growth of late, particularly those well-located properties with a high land value content.

However, the Greater Brisbane market is clearly somewhat patchy to say the least.

Generic units are not faring so well with rental growth stagnating in many locations, and there appears to be comparatively speaking very little upwards pressure on many of the suburbs in the outer.

Although the CoreLogic-RP Data Daily Home Value Index does not cover the smaller capital cities, the monthly release for April showed that both Canberra and Hobart had recorded capital growth over the past year of just 1 per cent.

Darwin is also in negative territory and with the levels of stock on market rising fast, the outlook in the Top End is dimming.