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Party's over as auctions take a hammering

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  • Party's over as auctions take a hammering

    Party's over as auctions take a hammering

    John Stapleton | March 17, 2008

    AUSTRALIA'S property market has taken a nosedive, with falling auction clearance rates in most capital cities at the weekend.

    Brisbane performed worst, with a clearance rate of 24 per cent, less than half the rate at the same time last year.

    In Sydney, the clearance rate dropped below the psychologically important 50 per cent mark, with only 48.3 per cent selling, a drop of 11 per cent on the same time last year.

    Volumes were markedly higher than last year in all states, partly because of the coming Easter weekend but also because mortgage stress is forcing a large number of people to put their homes up for sale.

    Experts said the falling clearance rates reflected the dramatic drop in consumer confidence.

    In Melbourne, clearance rates were 67 per cent on record volumes, with more than 1400 homes and units up for offer.

    President of the Real Estate Institute of Victoria Neil Laws said clearance rates had been slowly declining since a peak of more than 80 per cent last October.

    "The market is very delicately poised," he said. "Anecdotal evidence from agents suggests interest rates have affected buyer confidence. The auctions this weekend were erratic; some went gangbusters and some were disappointing. These are very interesting times."

    Australian Property Monitors general manager Michael McNamara said present circumstances made it "hard not to be pessimistic about the property market".

    He said the sharp fall in consumer confidence, widely reported last week, was being reflected in the property market.

    He said confidence had been "beaten around" by two month-on-month hikes of 25 basis points in the cash rate, which had been compounded by the banks increasing their rates independently of the Reserve Bank.

    "The fall below 50 per cent in Sydney is not a good sign, which is a shame because there were signs of a recovery late last year," he said.

    "Now any hope of a strong recovery in the Sydney market has pretty much vanished. There are a lot of people for whom these last couple of lifts in the cash rates are the straw that broke the camel's back. The rise in the cost of living, record petrol prices - all of these things are biting."

    He said Melbourne's clearance rates, which had gone up to 90per cent last year, were now hovering in the 60s. In Adelaide, clearance rates were at 50 per cent, a drop from 62 per cent only last week. Brisbane's abysmal clearance rate of 23.7 per cent was less than half the same time last year.

    "I think the auction clearance rates will get worse than this by the end of the year," he said. "The party is over."

    Meanwhile, the Royal Australian Institute of Architects has warned that the mortgage crisis and the flood of home owners being forced to sell because of mortgage stress would increase the number of houses coming on to the market with serious faults.

    Robert Caulfield, Head of Archicentre, the institute's building advisory service, said the record number of properties for auction over the weekend and the record number of unsold houses created a buyer's market, but present circumstances meant this really was a case of "buyers beware".

    He said home buyers usually added the cost of repairs or renovations on to their mortgages, but this had stopped as interest rate rises and family budgets came under pressure.

    "The fact that we have 300,000 families likely to lose their homes this year because of interest rate rises and 750,000 families coming under extreme mortgage pressure, means the quickie makeover is a popular strategy for a quick sale."

    In normal circumstances these home owners would spend the necessary funds to repair their properties."

    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx