Auction clearances have surged back to boom-time rates, with Sydney posting an 80% clearance rate on the weekend according to Domain.
Last year, auction clearance rates had dropped to a relatively abysmal 65.1% as banks clamped down on lending to property investors.
Sydney's auction clearance rates have been stuck in the high 70% to low 80% range as spring sales continue. The number of homes being auctioned could be one of the primary reasons why the clearance rate remains high. 673 homes went to auction over the weekend, well down on the 870 on the same weekend last year.
Low interest rates, limited supply and rising prices all appear to be adding their weight to the property market, particularly in Sydney.
Sydney apartment sales are soaring
Despite warnings from a number of sectors about the overbuilding of apartments, long queues for apartments – a sign of the boom times in 2014 and 2015 are back according to Domain. Property developer Golden Age sold out 230 first-stage apartments at Macquarie Park on Saturday, with 80% being sold to local buyers and 20% to various buyers from China, Singapore, Canada and Malaysia says Domain.
Golden Age founder Jeff Xu has told Domain, "People were snatching, not buying … the display suite is going to close soon at this rate."
Domain also reports that Galileo Group sold half of its 100 apartments in Palisade Miranda on the weekend, having sold out its first stage a few weeks ago.
RBA forced to raise rates?
SQM Research's Louis Christopher has told Domain that auctions are abnormally high for this time of year. "If this persists, we will get double-digit capital growth, and if the RBA and the Australian Prudential Authority (APRA) do not take action soon, this could force the RBA to lift interest rates."
So far, the central bank has taken a relaxed attitude towards the property market, but could be forced to raise interest rates to cool the property market if it begins to show signs of overheating. APRA has also restricted annual lending growth to property investors at 10%.
Several banks have recently lowered interest rates they charge property investors, with ING Direct, AMP Limited (ASX: AMP) and Macquarie Group Ltd (ASX: MQG) all reported to have cut their mortgage rates for investors.
Melbourne auction market consistency continues
Melbourne has always had a strong auction culture and it is continuing. The city recorded a clearance rate of 79% on Saturday according to Domain, compared to 79.8% last weekend. 989 listings went to auction over the weekend, lower than the 1,232 auctioned off on the same weekend last year.
Domain says next weekend will see nearly 1,200 homes up for auction in Melbourne.
