Auction clearance rates remained high last week, signalling ongoing strength in the housing market despite the impending election and measures to limit rampant lending to investors.
In the week ending Sunday, 69.1 per cent of auctions were completed with a sale, based on a preliminary count by industry analysts CoreLogic, that was up from 67.4 per cent last week but below the very strong clearance rate of 76.9 per cent recorded this time last year.
Sydney was notably strong, with a clearance rate over 70 per cent for the third week in a row, although Melbourne was also solid with a clearance rate of 68.4 per cent.
Prices were up in all mainland state capitals except Adelaide, where there was no change last week, with gains ranging from 0.2 per cent in Brisbane/Gold Coast to 0.4 per cent in Perth, 0.6 per cent in Melbourne and 0.7 per cent in Sydney.
Annual growth was fastest in Melbourne, at 13.5 per cent followed by Sydney (12.3 per cent), Brisbane/Gold Coast (5.9 per cent), and Adelaide (2.4 per cent).
Perth remains in negative territory for the year despite last week’s gain.
Prices are down by 4.5 per cent from a year before as the market struggles to shrug off the cloying influence of the fading mining investment boom.
In December 2014 the Australian Prudential Regulation Authority warned banks to cap growth in lending to housing investors at 10 per cent per annum.
Reserve Bank figures show that the banks have heeded the regulator’s warning, with lending to investors slowing to well below APRA’s speed limit. But lending to home buyers has picked up by the exact degree needed to offset that.
Annual growth in housing credit over the year to December 2014, when APRA dug in its heels, was 7.0 per cent. The latest RBA figures show housing credit growth is still exactly 7.0 per cent, with latest monthly figures in line with that annual pace.
While there is a possibility that the Australian Labor Party will win the election next weekend and remove the ability to claim investment property losses as a tax deduction, it’s seems likely that many investors don’t believe the ALP will win.
Alternatively, some may be buying properties to get in ahead of the rule change, which would only apply to established homes bought after the new rule came in.
The latter explanation would be more consistent with the recent price pattern, with the usual late-May/early June price dip virtually undetectable this year.
If so, then buyers may respond to a re-election of the government by going into their shells for a while.