In recently released data from CoreLogic, auction clearance rates in capital cities are at their lowest level since December 2012.
The clearance rate is now at 53.6% down 4.2% from the previous quarter.
This may indicate that housing prices could be set to fall further.
Put simply, the houses and apartments just aren’t selling because vendors are asking for too much.
In order to understand why housing prices are falling a few key factors must be examined.
Houses in Melbourne and Sydney hit hardest
The most recent data shows that houses, particularly in Melbourne and Sydney, have borne the brunt of the pain:
Melbourne and Sydney account for 60% of the Australian property market by value.
But the real pain in the months to come may be felt by apartment owners.
Apartment prices could be hit even harder
Let’s look at the data.
Below we have a chart of high rise apartment approvals:
As you can see there is a spike between 2016 and 2017.
There is little mystery behind this trend when you see what’s going on below:
Source: Yahoo Finance
So as you can see, in 2015 there was a massive investment by Chinese buyers which spurred property developers to create more apartment units to keep up with demand. But this demand has now died off.
As a result you have a situation where over the next year, an additional 94,471 new units will be completed nationally.
In the next two years, the number jumps out to 251,751 units, which represents a 9.3% increase in supply.
This could spell big drops for unit prices in the years to come.
As one conveyancer notes:
‘No-one wants to be out there catching a falling knife.’
Combined with the growing chance of a recession, it could be wise to look at ways of protecting your wealth.
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