Key points

• As property prices fall, home sellers are becoming more willing to meet the market. 
• Auction clearance rates have edged higher for two months, but remain in territory that indicates price falls. 
• Buyers are cautious about not paying too much when they expect prices to fall further.

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The auction clearance rate has edged higher for two months in a row as home sellers reduce their price expectations to meet those of cautious buyers.

Auctioneers have noticed the occasional hot auction starting to creep back in, but many buyers are unable or unwilling to overpay as their borrowing capacity falls along with prices.

Auction clearance rates have edged higher for two months in a row.Credit:Peter Rae

Across capital cities, September’s clearance rate reached 58.9 per cent on Domain figures, up from 52.9 per cent the previous month and its trough of 49.6 per cent in July.

Despite the increase, fewer than 60 per cent of scheduled auctions sold under the hammer. A result below this threshold – the level considered a “balanced market” – points to likely further price falls ahead.

In Sydney, the clearance rate reached 58.5 per cent last month, up from a July trough of 49.1 per cent.

In Melbourne, the clearance rate hit 59.8 per cent in September, up from 50.9 per cent two months earlier.

Westpac senior economist Matthew Hassan said rising interest rates had been reducing the amount of money that potential home buyers could borrow, and the few sellers around are starting to adjust.

“It’s partly that sellers are looking at the market on price, and are willing to do that to get clearances,” he said.

“It’s feeling like a pretty unusual spring selling season. You’ve got some of the vibe in spring selling, and the lift in the clearance rate is part of that, but it feels like the sellers just aren’t there in numbers — it doesn’t feel like a turnaround in the market.”

He said there were more interest rate rises to come, taking mortgage repayments into tight territory for buyers.

Even in smaller capitals, clearance rates are ticking up, reaching 48.9 per cent in Brisbane, 67.3 per cent in Adelaide and 57.3 per cent in Canberra.

In Sydney, Menck White Auctioneers’ Clarence White has noticed clearance rates hovering close to the 60 per cent mark for weeks and said the market was “patchy”.

“The thing that’s changing is we’re seeing the odd good auction where we’ve got good confidence from buyers,” he said.

“We’re also having some where they’re really hard and difficult.”

Buyers are cautious because they expect prices to fall further — except at the occasional auction where half a dozen bidders turn up and they realise they must compete to win, he said.

Vendors are more in tune with the market now than they were earlier this year when prices started to turn but some sellers still expected a standout result, he said.

But owners were more hesitant to list when they knew they might not receive a top price and auction volumes were not as strong as he expected for this time of year.

He said interest rate rises were on buyers’ minds, but many were more worried about the outlook for price falls.

“You’re more likely to hear from a buyer ‘I think the market’s going to go down another 10 per cent’,” he said.

In Melbourne, Morrell and Koren buyer’s advocate Emma Bloom, who focuses on higher-end homes, has seen agents educating vendors about prices they could expect in this market.

“There’s definitely been some meeting of the minds as far as vendors and buyers, and the agents have had to really pull the vendors into the coaches’ boxes and say, ‘those blue skies are a bit greyer and darker now,’” she said.

Potential buyers are cautious because they expect prices to keep falling.Credit:Jason South

“There’s not really bargains out there — prices haven’t fallen off a cliff or anything like that — but the heat is definitely gone … there’s a more discerning buyer out there and they’re not getting fooled into settling for less.”

She said many sales campaigns were running through to auction day as buyers were not so keen to purchase prior, while among the properties that pass in, some were selling because they were priced to sell.

“Spring hasn’t sprung, that’s for sure. It’s been a disappointing season as far as transactions go, and opportunities and volume of stock,” she said.

“There’s a lot more trepidation out there just because of global sentiment, and the temperature out there is a lot cooler and more uncertain.”

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