Melbourne is set to surge ahead of Sydney and become Australia’s best performing housing market, with last week’s auction clearance rates in the NSW capital the lowest for the year, while action in the Victorian market held up.
Only 66 per cent of Sydney homes put to auction last week attracted a buyer, according to Core Logic RP Data.
Melbourne performed better than at the same time last year and held steady with the week previous, with nearly 1400 homes going under the hammer at a clearance rate of 73.4 per cent.
The drop in activity in Australia’s biggest property market comes as Westpac last week rose interest rates for owner occupiers in a move that many analysts expect will followed by the other majors.
Further debate on the future of the residential property market was sparked last week when Macquarie analysts claimed that house prices would drop by 7.5 per cent by mid-2017.
Economist Saul Eslake said that buyer sentiment had changed due to uncertainty about interest rates and the reduction in lending to property investors.
“These have contributed to a significant change in sentiment but I think that it’s too early to say anything more than that,” Mr Eslake told The Australian.
“Forecasts of imminent price declines are nothing new we’ve had those on a recurring basis since the global financial crisis,” he said.
One historic home on Melbourne’s affluent Ripponlea sold at an auction yesterday to local residents for nearly $3 million in front of a crowd of about 100.
Auctioneer Rodney Morley said that demand for freehold houses in Melbourne was still strong, adding that any weakness was in the inner city apartment market.
“Land is as hot as anything. For quality houses people are queuing up,” Mr Morley said.
The Reserve Bank of Australia on Friday issued a frank warning about the residential market, saying that there was an oversupply in the Melbourne and Brisbane inner city apartment markets.
On the entire market in Melbourne and Sydney, which is running at annualised price growth of 16 per cent, the RBA said: “There are a few tentative signs that sentiment may be turning in the housing markets of the two largest cities.”
Australian Property Monitors senior economist Andrew Wilson said last week’s auction results showed there was more steam in the Melbourne market, while Sydney was set to wane.
Century 21 Australia chairman Charles Tarbey rejected that values would drop significantly.
Mr Tarbey also criticised Westpac’s decision to raise rates on owner-occupiers and doubts the other banks will follow.
“I think Westpac has used the opportunity to increase their revenues at the expense of general home buyers who went into these transactions in good faith,” Mr Tarbey said.
“I believe the other banks will raise rates further for investors but not for the general homebuyer which would make it appear that Westpac is double dipping,” Mr Tarbey said.
Off-the-plan apartment seller, CBRE’s Justin Brown, said that price growth would be moderate but would not decline.
“There is a flight to quality, there is more choice for people, but the market is still robust and there is a fundamental issue that we have an undersupply,” Mr Brown said.
This article first appeared in The Australian.