Property market has another disappointing auction weekend

Monday, 24 November 2008

Patrick Stafford

National auction clearance rates have continued to drop, despite the official cash rate falling to its lowest point in three years and the likely prospect of another cut at next week’s Reserve Bank meeting.

Sydney has continued a second week of low clearance rates, falling one percentage point to 48%. A total of 253 properties went under the hammer, with 139 selling at a total of $82 million.

Melbourne rates also fell one percentage point to 53% – but are significantly down from the 78% recorded at the same time last year. The city saw 351 properties sold at a total of $197.4 million.

Real Estate Institute of Victoria chief executive Enzo Raimondo says buyers are wary to enter the market, but next week may see a surge in interest.

“The impact of the problems in the wider economy was apparent for the third week in a row as the clearance rate remained in the mid-50s after spending the first third of the year in the mid-60s,” he says.

“Next weekend is shaping as one of the biggest weekends in the year, with nearly 1000 auctions scheduled.”

Up north, Brisbane suffered a fall to 30% from last week’s 34%, with just 10 properties selling for a total of $6.3 million. Adelaide was the only city to escape a drop in rates, but remained steady at last week’s rate of 42%.

ROBERT GOTTLIEBSEN

Holiday home hell
The Fitch mortgage survey for the September 30 half year shows significant changes as to where mortgage stress is occurring in Australia.

In the last survey in March Western Sydney was in deep trouble, it’s still in trouble but it has not fallen further. My Western Sydney friends say that the mortgage stress rate has not increased because employment levels have held. However, most of the Western Sydney employment is limited skills work and is vulnerable to a downturn.

But for the moment, the higher levels of distressed mortgages have swung to holiday areas of NSW and Southern Queensland plus Perth, which are falling so rapidly that they may emerge as Australia’s basket case.

The Fitch survey was conducted when interest rates were at their peak on the 15 per cent of Australian home mortgages that have been securitised. Since September 30, interest rates have been reduced sharply and further cuts are almost certain. That has dramatically improved housing affordability.

With rates heading downwards, banks have tightened their lending criteria limiting buyers’ ability to borrow, which in turn affects house values. At the same time, there has been a sharp contraction in contract and bonus income and unemployment is expected to rise.

According to Fitch, the average level of mortgages that are at least 30 days behind was 2.13 per cent. In the September 2007 survey half-year the stress level was 1.56 per cent.

The overall Australian numbers are low by world standard but the problem areas are masked by the low levels of mortgage stress in Victoria, South Australia and most of Brisbane.

Among the high Western Sydney mortgage stress rates are Fairfield/Liverpool ( 4.07 per cent), Outer Western and South Western Sydney (3.5 per cent), Blacktown (3.2 per cent) and Canterbury Bankstown (3.1 per cent). Wollongong and Cesnock also have highly rates of mortgage stress.

But the worst performer in the half-year was actually Helensvale in South Queensland, including Hope Island, which had a massive 7.8 per cent mortgage stress rate and Surfers Paradise chalking up 4.08 per cent.

Normally in a downturn holiday areas are among the first affected.

Coolum and Yeppoon are the other Queensland holiday areas with high mortgage stress.

In NSW, holiday areas like Nelson Bay, Raymond Terrance and Katoomba were in the top 10 mortgage stressed areas in the country.

Perth has been Australia’s boom capital and houses have reached eastern states price levels. A year ago, WA had the lowest level of mortgage stress in the country, now its rate is higher than every state apart from NSW. However, if the sudden increase in stress levels continues it will surpass NSW.

Meanwhile, the stress levels in Vaucluse have suddenly risen into top ten contention and Black Rock is the main Melbourne area with mortgage stress. The gardeners in Mosman say that those who own $6 million houses are sacking their gardeners. Those with a $2 million houses are retaining the gardener. The biggest fall in home value will be in expensive houses.