- Auction clearance rates have plummeted in Sydney and Melbourne over the weekend, with figures expected to be finalised in the low 30s.
- The "near record low", according to Domain senior analyst Nicola Powell, came after live auctions were banned by the federal government last week.
- With hundreds of sellers forced to withdraw, and landlords subject to a six-month moratorium on residential evictions, Powell said the market is now firmly favouring buyers and renters.
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Auction clearance rates have plummeted to record lows after a government ban on auctions and open houses cannonballed what should have been the busiest weekend of the year.
Just 37% of Sydney and 35% of Melbourne homes sold over the weekend, according to preliminary figures, as COVID-19 restrictions take a toll on the country's two biggest property markets. Both are expected to end up in the low 30s when figures are finalised, a far cry from the mid to high 70s being posted a few short weeks ago.
"Clearance rate dropped to what was a near-record low, both in Sydney and in Melbourne, but what we did see was a surge in vendors opting to actually withdraw their home from auction," Domain senior research analyst Nicola Powell told Business Insider Australia. "That really was a response to the Federal Government banning those on-site auctions mid-week, meaning owners only had days to choose what to do."
Of Melbourne's 1,404 scheduled auctions, more than 800 homes, or 57.5%, were withdrawn before the weekend. Similarly in Sydney, 51.8% of 1061 auctions didn't go forward. That compares to withdrawal rates around 6% and 11% respectively over the month of February.
It's hardly the result analysts were expected a short time ago, with more than 3000 homes around the country going to auction in what had firmly been a sellers' market.
Despite the government ban in place, virtual auctions and private sales still went ahead
Instead, sellers who decided to stick to their guns over the weekend were left with three options.
Nationally, just shy of 3% chose to push their auction forward to circumvent the government's ban, 54.7% decided to go for a private sale, while 10.3% tried a virtual auction according to Domain data supplied to Business Insider Australia.
Live-streamed auctions are just one of the possibilities being put forward by the real estate industry as it attempts to forge ahead with the business of buying and selling homes in the midst of a global pandemic. Video chat tools like Google Hangouts and Apple's FaceTime will also be increasingly used by agents to provide one-on-one digital viewings, although it may take a minute for the new technology to find its feet.
"With the rapid transition to on-line auction formats, some agents reported technical challenges and connectivity issues," CoreLogic research analyst Caitlin Fono acknowledged in a research note. "No doubt many of these challenges will be resolved with the benefit of more time to prepare."
Falling clearance rates, prices forecast to fall and a moratorium on evictions have flipped the Australian property market
While agents grapple with their new toolbox, the market too must come to terms with its new normal. The weekend was the first real indication of what that might look like, the result was like skewed given the number of last-minute withdrawals. Instead, Powell believes it won't be until May and after a slew of public holidays that the lay of the land becomes clear.
"The nearest thing that we can compare it to is the impact on the property market in Hong Kong, where they saw the SARS outbreak in 2003," she said. "As the infection curve rose, we saw prices fall and transactions and listings slow. But as soon as they contained the virus, the property market rebounded and the rebound was actually stronger than how the market was performing prior to SARS."
"I'm expecting the same thing to occur in Australia, where we'll see a slowdown and prices to pullback."
Exactly where prices will fall will likely depend on how high unemployment rises, but would-be buyers in secure positions may not be deterred from the market.
"It's going to be a buyers market from here and I think that will assist those people with job security get on the property ladder. It could become an opportunity for some to take advantage of improved affordability if we do see prices fall," Powell said.
The latest auction results come as state and territory governments indicate they'll enforce a six-month moratorium effectively preventing residential tenants from being evicted due to financial distress. Thrown in with a flood of short-term rentals returning to the market, Powell said it's certainly shaping up as a win for renters.
"Tenants will find in this new rental marketplace they have greater choice, greater negotiating power, and ultimately security moving forward in these uncertain economic times."