Major tax changes announced in the latest federal budget have helped drive Melbourne’s auction market to its lowest June clearance rate on record.
Melbourne’s auction market has suffered through its worst start to winter on record, with a dismal 48 per cent clearance rate across June bad enough to push values down.
It’s the latest sign the housing market is buckling in the aftermath of a disastrous federal budget for the sector put a significant dampener on investor demand, and comes as the city kicked off July with a preliminary 52.6 per cent clearance rate yesterday from 371 results.
PropTrack economist Luc Redman said it reflected recent weak sales trends brought on by budget tax changes, interest rate hikes and cost-of-living pressures, but after a more than 1.5 per centage point lift from a week ago, could be a very early sign of improving confidence.
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But his analysis of the final four weeks of June shows while there were worse individual weeks, the 48 per cent monthly average clearance rate was actually worse than the 55.4 per cent for the same month in 2021 and the 57.6 per cent recorded in 2020.
Both years were heavily impacted by restrictions over where people could go, with caps on the number of people able to attend an auction even outside of lockdowns.
Last year, June ended with more than 66 per cent of home sellers testing the market notching a sale.
Mr Redman said the clearance rate was the worst in the data available to the firm, which tracks back to 2019, “and we are starting to see that affect price movement”.
4 Kingston Blvd, Hoppers Crossing, recorded the days top sale under the hammer yesterday at $2.2m.
Separate PropTrack figures released last week showed Melbourne’s $984,000 median house price dropped by about $5000 (0.5 per cent) in June, in an acceleration of the city’s waning real estate fortunes.
While Mr Redman said the firm was still expecting Melbourne home values to grow in an 18-month time frame, any further deterioration in the auction clearance rate would likely indicate further home price falls in the month ahead.
The economist added that their data showed a further 10 per cent of homes taken to auction but passed in were selling in the month that followed, suggesting post-sale negotiations were till providing a reliable path forward for vendors.
Real Estate Institute of Victoria chief executive Toby Balazs said the June result showed “a lack of confidence in the property market”.
“But from a buyer’s perspective this could represent a good opportunity in a market that is softer and more challenging,” Mr Balazs said.
Sales are still occurring, but they are increasingly taking longer to lock in and often after the vendor lowers their price expectations.
However, he warned that they were still seeing signs that more affordable price points where first-home buyers would be house hunting were still performing well and that they might still be facing significant competition.
“So it might not be as much of a positive for getting people on the property ladder,” Mr Balazs said.
Both he and Mr Redman noted that the timing of the federal budget’s announcements for major changes to negative gearing and capital gains tax benefits for property investors.
Since the night of the budget on May 12, investors have been unable to purchase a property with negative gearing impacting anything more than income derived from rental returns — unless it is brand new.
New builds are also the only properties that can now be purchased and deliver the 50 per cent capital gains tax concession available before that date, with subsequent purchases for established homes only able to access an indexed discount.
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