Settlements data and clearance rates indicate property market cool-off

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on March 10, 2022 Fact Checked
Settlements data and clearance rates indicate property market cool-off

Slowing buyer demand, tighter lending conditions and affordability constraints contributed to an easing in national home value growth rate in February.

Recent data from CoreLogic's Property Pulse and PEXA Insights show the market could be cooling slightly.

According to CoreLogic's Property Pulse, property listings volume is on the rise. 

"More advertised stock is being added to the market than usual," the report read.

"At the national level, the four weeks to March 6th saw new listings trend 4.8% higher than the equivalent period of 2021.

"At the national level, total listings remain well below the average for this time of the year, as high sales volumes have seen around 1.2 sales for every new listing added to the market in recent months."

According to CoreLogic's report, auction clearance rates have also softened and properties are taking longer to sell.

"Clearance rates averaged 72.4% in the four weeks to February 27, down from 78.8% in the equivalent period of 2021," the report read. 

"Clearance rates are expected to trend lower amid softer housing value growth.

"Properties are taking slightly longer to sell at the national level, as new listings volumes rise.

"In the three months to February, the median number of days on number was recorded at 30, up from a recent low of 21 days in the three months to December."

PEXA insights show NSW residential settlements were down 26.8% month on month in February. 

All measured states saw decreases in sales, with Victoria down 7.1%, Queensland down 6.2%, and WA down 2.8%.

While the RBA is yet to raise the official cash rate, lenders haven't waited for the central bank to act, hiking interest rates across the board to start the year. 

On Wednesday, the RBA hinted a rate hike is 'plausible' in 2022. However CBA and AMP Capital both predict the hike will come as soon as June. 

Regardless of when the central bank acts, home loans are now more expensive than the all time lows experienced throughout the pandemic.

According to data from CoreLogic, dwelling values in Australia are 20.6% higher over the past 12 months - with a 0.6% gain in February - which is down from the recent high of 22.4% in the 12 months to January and monthly market peak of 2.8% in March 2021.

Recent CoreLogic data also showed Sydney experienced its first dip in property prices in roughly 18 months.

Total settlements in February for NSW

  NSWFEBPEXA.png

Expert issues warning to investors

Godfrey Dinh, Futurerent CEO and founder, said investors need to brace for increased interest rates in the near future. 

"Property investors haven’t stomached a rate hike in the past 12 years and have enjoyed relatively low mortgage repayments in recent times," he said. 

"Property investors should prepare for the prospect of a rate hike by reassessing their cash flow position. It’s a good time to think about how higher mortgage repayments could impact their household budgets.

"Investors who entered the market over the last year have had a dream run, enjoying three rate cuts since November 2020, totally 0.75% and experiencing solid price gains.

"We expect these favourable recent events will mitigate increases to interest rates going forward for newer investors, while more seasoned investors have even larger cushions having borrowed at historically higher rates and lower prices."

How to identify a property market 'peak'

A report from CoreLogic in January detailed how to determine a peak in the housing market.

CoreLogic’s Research Director Tim Lawless outlined how to identify a market has peaked:

  • Rising advertised stock levels.
  • Affordability constraints.
  • Weakening auction clearance rates, and
  • Softening vendor metrics such as longer days-on-market and larger levels of discounting.

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Aaron joined Savings.com.au in 2021. He is a finance journalist with a keen interest in property, the share market, and improving financial literacy in young Australians.

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