The auctions market has provided yet another disappointing result nearly halfway through the spring selling season, despite hopes the market would be able to pull through after the end of the football season.
The disappointing result over the weekend comes as new research from the International Monetary Fund suggests the Australian housing market is as much as 15% overvalued.
APM economist Andrew Wilson blames the poor performance of the market on the recent volatility seen in the sharemarket, which has both tumbled and regained its losses over the past few weeks as the debt crisis continues in Europe.
“I thought the results would be higher,” he says. “It’s the lowest result in Sydney for a couple of weeks.”
“I think we’ve just gotten a little ahead of ourselves with all this negative economic news, and I think that’s incrementally affected confidence, sellers particularly. There’s been some resilience, but I think that might have come off last week.”
The sharemarket rose over 3% last Friday as European leaders said they came even closer to amending the debt crisis plaguing a number of EU nations. But Wilson says he believes the dollar is affecting consumers more than the European situation.
“This wasn’t just a shift around for the dollar, it was one of the most significant shifts in months, and sent it to the low 90s. That tended to set off some alarm bells, and there’s been a lot of talk about that.”
However, although clearance rates still remain in the mid-50s, Wilson says consumer confidence is set to improve and the prospect of a rate cut could get people buying again.
“Things are still reasonably bright. As long as we keep getting these volatile shifts in economic news, it makes confidence more fragile and the macro-economic fundamentals tend to get ignored.”
According to a statement from Real Estate Institute of Victoria chief executive Enzo Raimondo, buyers may have welcomed the RBA decision to keep interest rates stable but “it was not reflected in an improvement in buyers’ confidence”.
The Victorian clearance rate was 53%, with 501 auctions on the market. Sydney recorded a 55.4% clearance rate, while Adelaide and Brisbane recorded 38.9% and 23.1% respectively.
Meanwhile, a new IMF report on the Australian economy has said that although the country is in an “enviable” position, this is threatened by an overheated housing market and a reliance on resource exports.
”A key risk is that the global recovery stalls or Asian growth falters in the near-term, impacting demand for commodities. Contagion from the euro area periphery and uncertainty about progress towards fiscal consolidation in the United States could also destabilise global funding markets,” it said in the report.
It also said that in some circumstances housing could be as much as 15% overvalued. However, Treasurer Wayne Swan responded to the report, telling the ABC he disagreed with some of its assumptions.
“There is a shortage of housing in Australia, a structural shortage of housing. Yes it is true that house prices have softened somewhat across the country, as there is a shortage of housing. What that means is that there is a lot of pressure to increase supply.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
