Sydney Housing Market Cools as Auction Clearance Rate Falls

  • A third of home auctions failed to find a buyer last week
  • Bidder numbers at each auction down by two thirds, agent says

Sydney’s surging housing market may be cooling with the proportion of home auctions that successfully found a buyer last week falling to the lowest level in 10 months.

Sydney’s auction clearance rate, a gauge of housing demand in Australia’s largest city, fell to 66.6 percent for the week ending Oct. 18. That was the lowest level since December 2014 and well below a peak of just over 90 percent in April, according to property researcher CoreLogic Inc.

The waning buyer interest comes after home values soared 44 percent in the three-years to Sept. 30, reducing affordability amid a regulatory clampdown on mortgages and slowing wage growth. Westpac Banking Corp., the country’s second-largest mortgage lender, Wednesday increased home loan rates to owner occupiers for the first time in five years as it raised A$3.5 billion in equity capital to meet stricter capital rules.

“Buyer interest is dropping as bank lending tightens,” said Jay Bacani, a real estate agent at Ray White in Baulkham Hills, a suburb in northwestern Sydney. “They are also concerned that other lenders may follow Westpac in raising rates. It is definitely getting harder to sell a property.”

Australia’s over-heated housing market could be starting to slow while rapid home construction in some areas is creating an oversupply, the central bank said in its semiannual assessment of risks to the country’s financial system Friday. Economists from Macquarie Group Ltd. and Bank of America Merill Lynch are predicting a fall in prices over the next two years because of increasing supply and lower-than-expected population growth.

SQM Research Pty. Monday said Sydney homes were overvalued by 40 percent and it expects price growth to slow to between four percent and nine percent in 2016.

After calling the housing market unbalanced, the Australian Prudential Regulation Authority in December urged lenders to limit investor home-loan growth to 10 percent a year and in July it said the largest banks would need to increase the capital they need to hold against potential losses on mortgages from July 2016.

The regulatory tightening has slowed growth in lending to landlords with such loans as a proportion of total mortgages dropping below 50 percent in August for the first time since July 2014. The measure fell to 48.5 percent from a peak of 53.5 percent in May.

The number of bidders at each home auction has dropped to between three and five from as many as 15 three months ago while the number of people viewing a home at its first open inspection has fallen to between seven and 10 from about 30, Bacani said.

“Sydney sentiment from buyers is starting to turn and buyers are slowly getting a little bit of leverage back into a market place,” Tim Lawless, research director at CoreLogic, said. “Over the next 12 months I wouldn’t be surprised if we see value growth in Sydney come down below the 10 percent mark and probably settle at five to seven percent.”

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