Sydney and Melbourne's strong auction market continues to hum along, with both cities posting clearance rates in the high 70's over the weekend.
Sydney had a clearance rate of 81.9% and Melbourne 76.9% according to CoreLogic. Domain also had similar results with 78.8% for Sydney and 77.5% for Melbourne.
That was despite nearly 1,000 homes up for auction across Sydney – the biggest weekend of the year in 2016 according to Domain.
"The remarkable Sydney home auction market didn't miss a beat with another strong clearance rate despite the highest offering of the year," Domain Group chief economist Andrew Wilson said.
The number of auctions in Sydney is still around 30% lower than last year, but clearance rates have ranged around 80% fairly consistently this year, compared to 60% last year.
Although, 2015 statistics may be an aberration given the clampdown on lending imposed primarily by the big four banks Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) from the middle of last year.
Those measures included banning loans to investors with only foreign income, increasing interest rates and loan limits, and lowering loan-to-valuation ratios (LVRs) for property investors. That likely saw many potential buyers drop out of the market in the latter part of 2015.
But this year has been different. It has also helped that the Reserve Bank of Australia cut the official cash rate twice by 0.25% each time, once in May and then again in August, slashing the cash rate to 1.5%. Lenders passed on some of the savings to mortgage borrowers with many non-bank lenders offering variable rate mortgages with interest rates of less than 4%. The big four banks' standard variable mortgage loans come with rates under 5%.
With such cheap debt available, it's no wonder the property market has made a comeback. That might not last too long, though – several lenders have started increasing their fixed-rate interest rates – a sure sign that variable rates are about to rise.
