It’s no surprise that Sydney house prices being at a record high coincides with interest rates being at an all-time low. Just as low rates equate to a strong market, a spike in rates can have the opposite effect, as we have witnessed over the years.
Through the middle of 2008, interest rates peaked with the cash rate at 7.25%. During this period we saw our monthly clearance rate drop to as low as 43% in August 2008 and the median sale price was $824,000.
This low clearance rate was not only isolated to Cooley Auctions and it was at this point that the RBA began its fierce cycle of interest rate cuts and in early 2009 it was down to 3%, in the middle of the GFC.
Interest rates plateaued over the rest of 2009 & 2010, before peaking again in February 2011, this time with the cash rate at 4.75%. As expected, our monthly clearance rate reflected a normal auction market and fell just below 60%.
Over the next 18 months, a slow downward trend on interest rates did little to boost confidence in the property market and by November 2012 the average number of bidders registering at our auctions had dropped to a mere 1.7 per auction, sustaining a clearance rate of only 52%. For those vendors who did sell on auction day only half of them achieved their reserve price.
Fast forward to February 2017, where the cash rate is at a record low 1.50%, our amount of registered bidders has almost tripled to an average of 5 per auction & the average sale price is $1,230,000.
Last month, In Sydney metro alone we conducted 333 auctions, achieving a monthly clearance rate of 80%. We sold $330m worth of real estate in Sydney and 4 out of 5 vendors who sold at auction each achieved an average of $82,000 over their reserve price.
We can expect to see this strong market continue through autumn and winter 2017 with experts predicting little change to the cash rate and at this stage no significant changes in bank lending policy.