According to Domain, national auction clearance rates have fallen from 71% to 67% in just one month.
Indeed, boom-time may already be over for Sydney, which, "has recorded its second consecutive auction clearance rate at below 70 per cent and is tracking at its lowest levels since 2012," according to the Finance News Network.
That's despite house values nationally climbing 11% in the year to September.
However, while a Grand Final weekend in Melbourne may have skewed the latest batch of auction results, the Victorian capital may be picking up some of Sydney's slack.
Mount Waverly, a blue-collar suburb in Melbourne's outer east, has appreciated by more than $100,000 a month over the past eight months.
All up, property prices in Sydney and Melbourne are up 16.7% and 14.2%, respectively, year over year.
However, as anyone who's been watching the market closely will know, the rapid gains in property prices around the two major cities have spooked regulators, and savvy investors.
Those up to their neck in property debt were no doubt sweating at the implications of the possible introduction of some of the 'macroprudential tools' being tossed up by regulators.
APRA's subsequent move to up the risk-weightings on investor loans and cap the amount of money that banks could lend to property investors will hurt the growth prospects of Australia's largest lenders. The ripple effects of these decisions could now be flowing through to the market.
While talk of rising interest rates may be a little premature, the property market may be turning away from the complete control of sellers, to a more balanced market.
"Sydney's strongest ever sellers' market is now morphing into a more balanced contest with the real prospect of buyers gaining the upper hand in some regions," Domain Senior Economist, Dr. Andrew Wilson, recently wrote.
Lower interest rates could provide the impetus for more buying activity, with some 'experts' betting on an interest rate cut in time for next month's Melbourne Cup.
Foolish takeaway
I've never doubted the property market as being one of the best ways to grow wealth over the long term. However, it is a cyclical market, and savvy investors must be mindful of this undeniable characteristic before hitting the buy button on a property.
You only need to look to shares to know the market may be cooling with names like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) – which control 50% of all Australian mortgages – coming off the boil in recent months. In fact, CBA, Westpac and Mortgage Choice Limited (ASX: MOC) are down 22%, 24% and 31%, respectively, since their highs in April.
Although it is certainly an imperfect indicator, the sharemarket is forward-looking and could provide some useful insights for investors in property.
As with any investment it is vital investors consider the risks — before the expected rewards – before making a decision to buy.
