Sydney, Melbourne property market ‘strong’ despite bank levy ‘confusion’

Auction clearance rates were largely steady in Sydney and Melbourne, with agents describing the market as “strong”, although higher supply and concerns about the new bank levy kept buyers in check.

A total of 76.2 per cent of Sydney homes up for auction last week were sold, while that rate was 77.3 per cent for Melbourne, according to preliminary data from CoreLogic. That compared to final clearance rates of 74 per cent for Sydney and 77.9 per cent for Melbourne the previous week.

Final clearance numbers are released midweek and are typically several percentage points lower than preliminary clearance rates.

Preliminary clearance rates for the previous week showed a clearance rate of 80.7 per cent for Sydney on 1053 scheduled auctions, while Melbourne recorded a rate of 79.2 per cent on 1323 scheduled auctions.

Th house at 29 Northwood Street, Camperdown, is in one of the property hotspots that pepper the country.
Th house at 29 Northwood Street, Camperdown, is in one of the property hotspots that pepper the country.

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The latest weekend preliminary clearance rates for the two cities were similar at 76 per cent for Sydney and 77 per cent for Melbourne, according to Domain. Last week’s finalised figures were 76.9 per cent and 79.2 per cent respectively.

More properties were sold despite a higher number of homes listed for auction and concerns from buyers about banks raising mortgage rates to pay for the bank levy.

The number of auctions in Sydney was higher at 1086 against 1075 last week and 811 at the same time last year. Melbourne total listed auctions were 1350, higher than last week’s 1326 and last year’s 1150.

Strong migration

Domain chief economist Dr Andrew Wilson said the market was still “very strong” due mainly to low interest rates. “The markets are bubbling along quite well,” he said.

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“Demand is still ahead of supply … there are skyrocketing rents in Sydney. There is strong migration … and all that nonsense last year about oversupply proved to be just that – nonsense.”

If the Reserve Bank of Australia cuts rates again, housing demand would continue and possibly rise again, Dr Wilson said. However, this time banks would be able to deliver a “neutralising effect” by raising rates, he said.

According to Bloomberg, economists are expecting the RBA to keep rates on hold this month but some expect a rate cut in the third or fourth quarter of 2017 to about 1.47 per cent. A small rate rise to 1.51 per cent is expected after that, in early 2018.

“We are still seeing good numbers at open homes and this is a strong result, however there appears to be confusion within the marketplace,” Belle Property’s Maria Magrin, who sold a two-bedroom house in inner-city Camperdown on Saturday with Paul Caradonna said. 

“Buyers are wondering if the banks will lift mortgage rates again due to the bank levy, plus with so much talk of housing affordability some buyers are starting to worry that we’re in a bubble and prices will eventually drop.

“However, clearance rates are still good and strong sales continue, so there’s definitely mixed sentiment in the marketplace.”

The pair sold 29 Northwood Street for $1.459 million to investors from the Sydney north shore suburb of Gordon. It was $79,000 over the reserve price of $1.38 million.

To accommodate strong demand through faster supply, NSW Minister for Housing and Planning Anthony Roberts introduced the “Greenfield Housing Code” last Friday, allowing homes in greenfield areas in western Sydney to be approved in 20 days compared to the state’s average of 71 days.

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“The proposed complying development standards such as building height, setbacks and landscaping have been tailored to suit housing types and lot sizes in new release areas. This will ensure new homes are designed to protect the privacy and amenity of neighbourhoods,” he said. 

The code would also ensure new residential suburbs were leafier, with the government providing, free of charge, trees to owners of these new homes. Up to 5,000 trees a year for three years were on offer.

Housing hotspot

In Melbourne, things were going “pretty well”, Buxton Real Estate’s Dimitri Damianos said.

He sold a three-bedroom house at 81 Marlborough Street, Bentleigh East in Melbourne, with Chris Hassall to an upsizing family for $1.43 million, past the reserve price and asking price of about $1.24 million to $1.26 million.

Regional areas also scored a win.

HIA’s latest Population & Residential Building Hotspots 2017 report released on Sunday named Pimpama in Queensland as Australia’s number one housing hotspot, based on its performance during 2015/16.

In second place was Sydney’s Cobbitty-Leppington area, followed by Palmerston-South in the Northern Territory.

Population in these areas grew by more than the 1.4 per cent national average during 2015/16 and had at least $150 million worth of residential building approved, HIA said. 

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