Auction clearance rates may have risen but home prices are still falling

• Australian auction clearance rates jumped noticeably last week, coinciding with renewed chatter about the potential for additional RBA rate cuts.

• Auction volumes still remain well below the levels seen 12 months ago.

• Clearance rates often improve in the early pasts of the year, so the recent bounce is not unusual.

• While clearance rates have bounced, home prices across the mainland state capital cities have not.

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Australian auction clearance rates jumped noticeably last week, coinciding with renewed chatter about the potential for additional RBA rate cuts over the next 12 months.

According to CoreLogic, Australia's combined capitals preliminary clearance rate jumped to 54.1% last week, up substantially from the initial estimate of 47.8% seen seven days earlier.

According to the group, 929 auctions look place across the capital cities, up from 536 in the prior week. Of those, CoreLogic received results from 627, representing a reporting rate of just 67.5%.

341 homes sold prior to, at or after auction while 286 properties were passed in, including 41 that were withdrawn prior to going to market.

Preliminary clearance rates for houses stood at 54.7%, marginally higher than the 52.8% level for units.

Despite the jump in the preliminary estimate, the figure was still well below the 63.7% final clearance rate seen in the same corresponding week a year ago when a substantially higher 1,470 homes went under the hammer.

Given the tendency for preliminary estimates to be revised lower as tardy, often unsuccessful results, come to hand, and with reporting rates weak, CoreLogic expects the final clearance rate for the week to fall back below the 50% level when released in three days time.

"It’s expected this will revise lower as the remaining results are collected to remain around the mid-to-low 40% range," it says.

In the prior week, the preliminary combined capitals clearance rate was revised down to show a final figure of 42.8%, just off the record low of 40% set in late December last year.

Across individual capital city markets, Sydney led the national improvement last week, recording a preliminary clearance rate of 59.2%.

"Sydney was the best performing capital city auction market according to final results last week, while this week’s preliminary clearance rate is also the highest amongst the cities," CoreLogic said.

Preliminary clearance rates in Canberra, Melbourne and Adelaide also rose strongly during the week, coming in at 52.5% or higher, while those in Brisbane and Perth also rose compared to seven days earlier.

While the broad-based rebound across the country suggests that talk of lower interest rates may be encouraging renewed buyer demand, CoreLogic cautions the bounce seen last week is not all that unusual for this time of the year.

"Although clearance rates and activity remain low, the early flow of auction data for 2019 is showing a subtle bounce back in the clearance rate relative to the lows recorded through December last year which is a seasonal trend similar to what has been seen over previous years," it says.

"Comparing results to one year ago, volumes and clearance rates are significantly lower than what were seen over the corresponding week last year."

So the bounce likely reflects seasonality, as well as a significant reduction in properties being put up for sale via auction compared to levels seen in prior years.

Louis Christopher of SQM Research was another to caution about extrapolating the weekly result.

"We need to be careful about reading too much into the fact that the numbers are higher than where they were in December," Christopher told the AFR.

"That was to be expected.

"There are more buyers seasonally in late summer and autumn and there are more sellers in spring and early summer. You tend to see a little bit of a lift in the auction clearance rate.

"Beware the apparent bounce -- auction clearances rates are lower than they were this time last year and the market was having a downturn this time last year."

Christopher says he'd be a "bit more positive" about the market outlook should clearance rates start to climb into the 60% region.

Reinforcing the need for caution, the lift in CoreLogic's preliminary preliminary clearance rate was not replicated in the group's separate hedonic home value daily index over the same period.

Last week, the median home price in Australia's mainland state capitals fell by 0.2% in average weighted terms. That reflects flat to lower price outcomes across the country, including declines of 0.4%, 0.3% and 0.2% respectively in Perth, Melbourne and Sydney from seven days earlier.

Put bluntly, while clearance rates have seen a noticeable improvement since late last year, the downtrend in home prices, despite a significant reduction in new stock hitting the market, is still looking very much the same.