Auction sales dive as interest rate fears deter home buyers
Stapleton, John. The Australian [Canberra, A.C.T] 14 Apr 2008: 3.
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Abstract
“Any time you divert taxpayer funds to encourage people to buy, it is counter-productive to improving affordability,” he said. “Essentially what was intended to improve affordability did the exact opposite. And now we’re all paying the price.”
“A lot of first-home buyers were encouraged into the market and took out loans whose repayment schedules were far larger than they could reasonably pay,” he said. “Rising mortgage rates are bound to force many to sell. Buyer confidence is low, and there’s much more stock on the market. Real estate agents find themselves with all this stock, but nowhere near the buyer inquiry they need to sell them.”
Full Text
NERVOUS home buyers have not been reassured by Reserve Bank signals that interest rates will remain on hold, with auction clearance rates low across thecountry over the weekend.
“We are seeing auction clearance rates much lower than at the same time last year,” said Michael McNamara, head of Australian Property Monitors. “With mortgage rates rising so rapidly in the last few months, buyer sentiment in the property market has taken a battering.
“The Reserve Bank governor has signalled rates are firmly on hold, but that has not provided any comfort.”
In Sydney, the clearance rate was 50.2 per cent, only a slight improvement on the previous week’s dismal 45.7 per cent. The most expensive sale was a five-bedroom house in the beachside suburb of Bronte for $4million.
Melbourne’s clearance rate was 62 per cent, well below last year’s 84 per cent. The median house price was $552,000, with the dearest house, at Canadian Bay, fetching $2.5million.
In Adelaide the clearance rate was 47.2 per cent, a dramatic drop from last year’s 73.5 per cent.
Brisbane’s property market continued to nosedive. The clearance rate for the weekend auctions was 35.7 per cent, down from last week’s 37.9 per cent.
Mr McNamara said another problem developing rapidly in the troubled market was the large stock of unsold inventory, creating a bottleneck. The situation reflected the large number of people originally encouraged into the market by government initiatives such as the First Home Buyers grant.
“A lot of first-home buyers were encouraged into the market and took out loans whose repayment schedules were far larger than they could reasonably pay,” he said. “Rising mortgage rates are bound to force many to sell. Buyer confidence is low, and there’s much more stock on the market. Real estate agents find themselves with all this stock, but nowhere near the buyer inquiry they need to sell them.”
Mr McNamara said with housing affordability now a major talking point in the media, there was sufficient data on the troubled state of the property market to clearly demonstrate how wasteful of taxpayers’ money the billions of dollars spent on the previous federal Government’s $7000 First Home Buyers grant had been.
“Any time you divert taxpayer funds to encourage people to buy, it is counter-productive to improving affordability,” he said. “Essentially what was intended to improve affordability did the exact opposite. And now we’re all paying the price.”