Sydney and Melbourne property prices set to improve

Is the worst of the property market slump behind us? Well, after auction clearance rates in Australia’s two biggest cities had another strong showing over the last weekend, it seems that way. 

Just last week, we reported that Brisbane and Mackay in Queensland were leading the way in the recovering housing market, but it appears Sydney and Melbourne are performing their own resurgence. 

Clearance rates, which are the proportion of properties sold at auction, ran home strongly for a sixth-straight week and look to be the best in around two years for both cities.

According to CoreLogic figures, investors and owner occupiers pushed Sydney’s preliminary clearance rate up to 81.5 per cent.

The pick-up has also been shown in Victoria — the country’s largest auction market — where preliminary clearance rates were as high as 74 per cent after 360 auctions were held over the weekend. 

While the final figures of these preliminary clearance rates came in slightly lower, it puts both markets on course for their best result in years, according to AMP chief economist Shane Oliver.

“If you look back at the past cycle, clearance normally leads volumes. If you look at the relationship between rebounding clearance rates and prices, this suggests that within a year or so prices will be up 10 per cent in Sydney and Melbourne,” Mr Oliver said. 

The recovery was also made evident last week by ANZ, when the bank changed its forecast from its prediction in May, saying it expected prices to start increasing this year, something not previously expected. 

The reasons for this rebound has been put down to a number of factors. The Reserve Bank of Australia cutting the official interest rate two months in a row has certainly had an impact, while the federal election result in May thwarted Labor’s attempt to halve the capital gains tax discount — and it appears Australia’s two largest property markets are reaping the rewards.