Auction clearance rates in Sydney and Melbourne tell different tales for the first weekend of the summer selling season.
According to Domain, Sydney's auction clearance rate fell to 75.8% on Saturday, compared to 78.8% the previous week. It was the lowest rate recorded by the local market in more than four months say Domain, despite 870 homes going to auction, compared to 2016's record 961 houses up for auction last weekend.
In contrast, Melbourne's clearance rate continues to sizzle, rising to 79.9% from 77.5% last weekend. That may have something to do with only 1,200 homes going to auction compared to 1,368 the previous week.
Both cities were well ahead of last year's clearance rates of 65% for Melbourne and 57.5% for Sydney over the same weekend.
CoreLogic has slightly different preliminary results, suggesting that of the 1,158 auctions held in Sydney this week, 77.7% of the houses were sold, compared to 77.1% last weekend. Melbourne's clearance rate on 1,410 auctions held during the week was 79.3%, up from 76.1% last week.
What property investors may be missing is that the clearance rates could have started to be affected by lenders beginning to raise their interest rates on mortgages, as we noted last week and in November.
Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) have all raised rates on fixed-term loans over the past month or so.
While it appears to be mostly fixed-term loans that are seeing higher interest rates, it may not be long before lenders start raising interest rates on variable-rate loans.
Higher funding costs, increased competition for deposits and weak system credit growth are all factors that are forcing banks to raise rates ahead of the Reserve Bank of Australia (RBA).
That could eventually start to bite on auction clearance rates as vendors pull their homes off the market, and buyers disappear because they can't get the finance.
