The price increases we are currently experiencing across Australia may be short lived, particularly given that interest rates are still rising. The 10th rate hike in a row today takes the official cash rate to 3.6 basis points. It has been a stressful year for mortgage holders with average mortgage repayments increasing by $1,000 a month since the start of 2022. High levels of demand however are still showing up in our auction data. In particular, the average number of active bidders at auction. As a measure of demand, the number of people actively bidding at auction is (in my opinion) a much better one than clearance rates. If you are putting up your hand to buy a property, it almost certainly shows that you are ready to buy.
In February, auction clearance rates hit 2.8 bidders per auction. It was the highest level we have seen since April last year, a month before interest rates increases started. The increases are consistent across capital cities where a lot of auction activity takes place. In Sydney, average bidders reached 2.7, a significant increase from the low experienced in June last year of 2.1. Melbourne and Brisbane hit lows in November last year but have also picked up considerably. Melbourne is now at 2.8 bidders (2.2 in November) while Brisbane is at 3.4 bidders (2.1 in November).
Will these higher levels of activity continue? With interest rates still increasing and many fixed loans coming to an end, from a financing perspective it doesn’t look great. On the other hand, Australia’s population growth is increasing by 300,000 people per annum, building approvals are falling, fewer homes are being completed and new listings are down 13 per cent. It will certainly be an interesting market to watch over the next few months.
