Australia’s property markets are getting hotter

Sydney has seen another strong auction clearance rate over the weekend, with yet another 80% plus result.

Following on from last weekend’s 15-month record 85.1%, Sydney saw a clearance rate of 81.5% on Saturday according to Domain. The same weekend last year was just 69.6%, after the banking regulator came down hard on the big four banks to slow lending to investors.

700 homes went to auction in Sydney on Saturday, compared to just 569 last weekend, but it was still well short of the 984 last year (and perhaps another indication of why the clearance rate was so low last year).

It could also signal that the constrained housing supply is boosting clearance rates and likely house prices too. Strong competition from buyers is likely to encourage sellers to raise prices, and we should see continuing price growth in Sydney houses.

250 homes will be auctioned off in Sydney next weekend – with the NRL Grand final on Sunday helping.

Melbourne is likewise on fire, with a clearance rate of 79.6% on Saturday according to Domain, consistent with last weekend’s 79.5% and increasing over the past three consecutive weekends.

The city had 950 auctions over the weekend, up from the 793 last weekend, but lower than last year’s 1,101. The AFL grand final will play havoc with the property market next weekend, with just 40 homes scheduled to go under the hammer in Melbourne.

However, according to Nick Dowling, CEO of Jellis Craig, despite the high clearance rate, prices are not going well in excess of reserve, with many just scraping across the line. He added, “We are also seeing an increased number of auction properties selling before the auction, which indicates that there’s a meeting point between what the seller is prepared to accept and what the buyer is prepared to pay.

That’s despite Domain reporting that buyers are outnumbering sellers by three or four to one, particularly in inner Melbourne and many middle-ring suburbs.

Low mortgage rates of under 5% from the big four banks Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) and even lower rates of under 4% from their non-bank competitors is encouraging buyers, but many homeowners are accessing their equity and the low rates to renovate – causing a shortage of supply.

That appears unlikely to abate anytime soon and strong auction clearance rates are likely to continue.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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