- Market in recovery and not 'dead cat bounce' phase
- High levels of auction activity promising for market outlook
- Uncertain how market will respond to latest cash rate increase
The growth is here to stay, says Ray White Chief Economist Nerida Conisbee.
While some have referred to the current market upturn in growth as a ‘dead cat bounce’, the auction data and bidding activity seem to support the argument of an earlier-than-expected return to growth.
Conisbee says that auction bidding is a robust method for measuring the demand for property. Unlike statistics on housing finance, online searches, or population growth, auction bids give real-time data on market activity. When a person bids on a property, there is a high likelihood that they are in the market and serious about making a purchase.
Auction bidding booming across the nation
A recent Domain Auction Report for May 2023 has shown that the real estate auction clearance rates across capitals have hit a 17-month high of 71%. At the same time, auctions across combined regionals recorded a 14-month high of 50.7%.
In other words, buyer confidence remains high, as they are still willing to make bids despite interest rates creeping upward, listings remaining slim, and prices and rents spiralling out of control.
However, it is essential to note that seller confidence remains low. Although auction clearance rates have been high, auction volumes have fallen. Thus, housing scarcity has partly contributed to the high auction activity.
The average number of active bidders nationwide dropped to a low of 2.2 last November, the lowest since April 2020, which coincided with the first month of the COVID-19 pandemic. On a local level, Sydney bottomed out much quicker in June 2022, recovering with its active bidding back to the same levels as in November 2021.
Bidding activity is on the rise
Adelaide is currently the city with the higher amount of active bidding. Hardly missing a beat last year, house prices in the capital city have risen to the same highs as in 2022, with the average active bidding reaching 3.7 in May. Likewise, the other cities’ bidding activity has been consistently moving upwards.
Average active bidders by capital city
Conisbee states that it remains unknown whether the latest interest rate hike will bring the market’s growth to a screeching halt. Auction numbers and the number of listing authorities, or properties signed but not yet advertised by Ray White, are inching upwards. An increase in the stock in the market may potentially slow down price growth and bidding activity.
