No ‘Big Short’ as auction results round out strong February

Feb 2016 - News

The capital city auction results at the weekend showed no evidence that buyers had concerns about a looming house price crash, as predicted by contrarian research house Variant Perception in its Big Short-themed report.

CoreLogic RP Data and Fairfax-owned APM both reported national preliminary clearance rates of more than 70 per cent from a busy weekend of more than 2000 auctions.

In Sydney, the preliminary auction clearance rate fell slightly from 76.5 per cent the previous weekend to 73.3 per cent, based on 673 of 872 auctions, while in Melbourne the clearance rate rose from 74.1 to 75 per cent, based on 1162 of 1327 auctions, CoreLogic RP Data showed.

The auction clearance rate also rose in Brisbane (58.3 per cent), Adelaide, (72.7 per cent), and Canberra (69.6 per cent). Nationally the clearance rate strengthened from 71.8 to 72.4 per cent, based on 2113 reported results.

The solid results came just days before Tuesday’s Reserve Bank monetary policy meeting, where it is expected to keep the cash rate on hold at a record-low 2 per cent.

“This week marks the fourth consecutive week of the combined capital city clearance rate being above the 70 per cent mark, with the stronger than expected auction results continuing through the final week of February,” CoreLogic RP Data said in its Weekend Market Summary.

“Capital city auction results haven’t recorded a four-week period where the clearance rates were consistently higher than 70 per cent since early September last year.”

EXPECTING INCREASES

CoreLogic RP Data and Moody’s Analytics said on Friday in a new report they expected 2.2 per cent increases in Sydney house prices in 2016 and 7.2 per cent increases in Melbourne.

Commenting on the weekend’s auction results, CoreLogic RP Data said: “The robust rate of auction clearance, together with the CoreLogic Home Value Indices continuing to show a moderate rate of growth through February, suggest housing markets are continuing to demonstrate a controlled slowdown, rather than any signs of a sharp correction.”

This was in stark contrast to the Variant Perception report, titled “I know a guy who can get things done”, by US economist Jonathan Tepper, which forecast a 50 per cent fall in house prices in Sydney and Melbourne and warned that “Australia now has one of the biggest housing bubbles in history”.

The report has for the most part been savaged by Australian housing experts and economists, including The Australian Financial Review’s Chris Joye, though one fund manager, Melbourne-based APT Capital Management, which is shorting banks, listed real estate agents and mortgage insurers, agreed with the report and said the market would crash in 2016. LF Economics’ Lindsay David and Philip Soos forecast a crash before the end of 2017.

CoreLogic RP Data’s Kevin Brogan said auction results over February did not portray the sorts of concerns expressed in the Variant Perception report.

“Clearance rates are a reflection of buyer confidence,” he said.

That said, he highlighted the very high clearance rates – between 80 and 90 per cent – in suburbs with higher-value homes, compared with much lower clearance rates in markets in Western Sydney, between 44 and 60 per cent.

WATCHING CLEARANCE RATES

However, he said he would be keeping an eye on the clearance rate as volume rose. Sydney won’t have its first big 1000-plus auctions weekend until March 19 because of the timing of public holidays.

At the weekend, Sydney and Melbourne’s top-quality housing markets both showed evidence of stronger buyer appetite, with a waterfront Hunter’s Hill sandstone mansion on a 1900-square-metre block selling for $6.51 million, more than $1 million above the buyers’ guide of $5.5 million. It sold through Nicholas McEvoy and Narelle Scott, of BresicWhitney.

In North Turramurra, on Sydney’s upper north shore, a three-bedroom knock-down on a large 975-square-metre block had a reserve of $1.1 million and sold for $1.55 million, with 30 registered bidders.

“A few years ago the area would never have hit $1 million but over the years this has changed dramatically, which is evident in today’s result, selling agents Charles Caravousanos and Belinda Shearer, of Savills Cordeau Marshall, said.

In Melbourne, a four-bedroom Toorak home off a quiet cul de sac sold for almost $5.8 million through David Colbran and Greg Herman, of Sotheby’s International Realty. The price guide was $5 million-plus.