An Albanese government change to property investment tax benefits has hammered Melbourne’s auction market, with 1000 sellers abandoning hammer time since.
Melbourne home sellers are giving up on auctions at an alarming rate, with more than 1000 abandoning a scheduled sale since the federal budget in May.
New PropTrack data shows that in the seven weeks following the heavily criticised budget, which announced major changes to property investor tax benefits, more than 16.3 per cent of properties scheduled to go under the hammer were instead withdrawn before hand.
It’s almost double the 8.3 per cent recorded for the same seven week period in 2023 — after the Reserve Bank had hiked interest rates 12 times in 14 months.
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With 546 Melbourne home sellers expected to test the market this week, down by a quarter from the same time a year ago, a continuation of the trend would leave almost 90 sellers walking away without an auction hammer being raised.
This year’s June pull back from sellers, and the two weeks of May that followed the federal budget, tally at 1085 lost auctions from a total of 6643 scheduled.
A year ago the number of sellers abandoning planned auctions equated to 762 out of 7248 in the same period, about 10.5 per cent.
PropTrack economist Luc Redman said there was “no doubt that withdrawals have increased”, but noted it would take more time to confirm if this was directly caused by the federal budget — or if other factors such as weakening confidence brought on by rising interest rates was contributing significantly.
Melbourne’s suburbs were once the heartland of the nation’s auction market — but rising numbers of sellers are withdrawing from planned sales.
Mr Redman said the withdrawal rate would be very closely watched in the coming weeks, particularly if the clearance rate remained at recent weak levels around 48 per cent.
Real Estate Institute of Victoria chief executive Toby Balazs said the rising level of homes being withdrawn from auction was a “barometer of confidence in the Victorian property market”.
“And unfortunately such a high withdrawal rate suggests people are not even testing the market, they are saying I will not proceed and that’s unfortunately a strong signal that confidence has been lost and we need policies and frameworks and incentives for people to feel comfortable once again to transact again.”
Mr Balazs said he believed the situation reflected both federal and state government policies, though the federal changes to investor tax benefits were more front of mind.
On May 12, the federal government’s budget revealed plans to limit negative gearing to new homes, as well as changing capital gains tax reductions from a flat 50 per cent to a more complicated indexed amount.
Investor property tax tweaks have hit Melbourne’s auction market hard enough to leave a growing share of sellers no choice but to pull their sale due to a lack of buyers.
“We are lacking a balance in the property market right now, and you can point to state and federal policy making that has exacerbated this,” Mr Balazs said.
Ray White chief economist Luke Banitsiotis said their data showed that 45 days after auction, for sales recorded from the start of May to the start of July, the clearance rate was rising by 14 percentage points.
Mr Banitsiotis said while it was tempting to compare the current situation to poor clearance rates during the Covid pandemic lockdowns, the reality was that people then were still so keen to buy they were doing so without ever visiting the home in person.
“What’s really taken the confidence out of the market now has been the government interference from the budget,” he said.
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