The week ending 10th of May delivered a final auction clearance rate of 59.9%. This has jumped from a clearance rate of 47.5% in the previous week and a recent low of just 30.2% only four weeks ago.
It is the highest clearance rate result since the week ending March 15, before the strictest social distancing measures were rolled out across Australia. However, the number of auctions held last week was almost 80% lower.
The increase in the auction clearance rate comes as on-site auctions resumed in New South Wales from Saturday the 9th of May, while auctions resume across most other states and territories this week.
Sydney had the highest clearance rate of the capital cities for the week ending 10th of May, at 66.3%. In Melbourne the final clearance rate was 56.5% for the week.
However, the above chart also suggests that the auction clearance rate had been improving since the week ending 19th of April, as the industry adapted to social distancing measures. Over the past few weeks, there was reduced downward pressure on the clearance rate, because fewer auctions were scheduled, and less auctions were subsequently withdrawn.
The auction clearance rate was not the only real estate indicator to show improvements over the past week, which has some asking whether there is a general improvement in the real estate market.
Since late March, CoreLogic has been reporting the weekly change in the number of reports generated by real estate agents across the RP Data platform – a strong leading indicator of new listings.
The number of new CMA reports generated in the week ending May 10th was up 6.0% over the week.
These indicators of improved buyer and seller activity come as consumer sentiment has made significant gains.
The Westpac-MI Consumer Sentiment Index went from a recent low of 75.6 in April, to 88.1 in May. The index had recovered 80% of the loss it had made in the month of April. The ‘time to buy a dwelling’ component of the index increased 31.8% over May.
Does this mean the property market is turning around?
Despite the gains in consumer sentiment, serious challenges lay ahead for the Australian economy and housing market demand.
As noted last week, there are some efficiencies to easing restrictions on property inspections, and holding on-site auctions, but it is not enough to make up for the 7.5% of employed positions that have been lost, or the 8.2% decline in wages paid, as reported by the ABS. These significant changes to jobs and income will constrain housing demand in the year ahead.
Another shock to housing demand is the frozen flow of people to Australia. The latest overseas arrivals data from the ABS showed a 98.5% drop in visitors to Australia over April. April estimates suggest 5,460 new arrivals to Australia, off the back of a 12-month average of 761,912. Combined with departures, there were 52,790 net departures from Australia over the month.
With slowed demand and a significant economic contraction playing out across Australia, we cannot confidently expect a turn-around in the housing market until certain economic indicators improve. The cash rate is highly unlikely to be reduced any further. This means it will take an improvement in employment and incomes to see increased purchasing capacity, which would support growth in the housing market.