Melbourne’s record-breaking property market topped a weekend of buoyant national auction results, despite a sharp slowdown in price growth.
A record number of properties were offered and sold in Melbourne, Sydney clearance rates returned to recent highs, and Brisbane performed strongly, weekend sales figures show.
“There’s still solid competition between buyers and sellers,” said Andrew Wilson, senior economist with Domain Group.
“This was a strong week for auctions nationally and results suggest the remaining eight weeks should provide good outcomes for sellers and plenty of choice for buyers,” said Robert Larocca, RP Data housing market specialist.
Market specialists say low interest rates, a rise in sellers and continued demand will maintain market momentum through to the end of the year.
But economists warn the growth in mortgage debt is risky and have called on the Reserve Bank to take swift action to cap lending by banks to households.
In its latest “business outlook”, Deloitte Access Economics says the Reserve Bank needs to go down the New Zealand path of capping bank lending by requiring higher loan-to-value ratios.
“The RBA should be nervous about Australian housing prices getting too far ahead of themselves,” the report says. While house prices were not yet a “bubble”, recent house price gains have accelerated and “on simple measures, housing looks to be about 10 per cent overvalued”.
The head of the financial systems inquiry, David Murray, has warned that household debt is being fuelled by tax breaks such as negative gearing and poses a risk to financial stability.
Deloitte Access Economics partner Chris Richardson said while the Reserve Bank would likely raise rates in 2015, “we wish they wouldn’t, and we do think there are alternatives”.
“As the New Zealand experience shows, there could be a degree of success in uncoupling prospects for housing prices from the wider impact of interest rates on the economy through the use of ‘macro prudential’ tools.”
The Reserve Bank’s reluctance to act fast, like the New Zealanders had, was “a mistake”. Mr Richardson said while jawboning by Reserve Bank officials about the risk of punting on property may have some impact in denting demand, the pull of the ‘great Australian’ dream’ was a far stronger one. “At the end of the day, if we decide the controls we put in place aren’t effective, we can undo them,” he said.
The Deloitte report says a range of factors including interest rates, prices, foreign buying and government incentives had boosted housing construction, but suggested “depressingly modest” gains in the level of construction activity in the next couple of years.
In Melbourne a record-breaking 1558 properties were auctioned and a record 902, or nearly eight out of 10 properties offered, were sold.
The clearance rate was even higher around the sprawling outer-eastern suburbs, which are typically mid-price range, and inner-bay side, a prestige area. A six-bedroom house in Hawthorn, with lap pool and tennis court, sold for about $5.35 million, the weekend’s top result. The area is close to leading private schools, the city and public transport.
SYDNEY’S CLEARANCE RATE
In Sydney, the clearance rate picked up to around 80 per cent, where it had been hovering in recent months, after slipping in the past two weeks.
“After two lacklustre weeks the Sydney market has returned to trend,” said Mr Larocca.
A three-bedroom house in Stanmore came in about $132,000 above reserve for $1.38 million. About 30 people attended the sale and three of the six registered bidders competed for the 1920’s house sold by Belle Property.
The weekend national clearance rate topped 70 per cent led by Sydney and Melbourne. Brisbane, which has been a weaker performer in recent months, is beginning to pick up with a clearance rate of more than 50 per cent and annual price rise of 6 per cent.
Average increase for property in the capitals is about 9.5 per cent, with Sydney posting 13 per cent, Melbourne 9 per cent and Adelaide, the slowest, nearly 5 per cent.
The rate of increase in property prices has more than halved since hitting a peak of about 4 per cent in the final quarter of last year when low interest rates and high confidence drove the market, according to market analysis.