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Absent sellers supporting housing prices

AAP logoAAP 19/09/2016 Garry Shilson-Josling, Economist

The housing market is holding firm, with auction clearance rates back up to the heights last climbed in mid-2015 and many sellers retreating to the sidelines.

At 77.9 per cent, the proportion of auctions leading to a sale in the week ending Sunday was the highest clearance rate record since May last year and not far under the late-April 2015 peak of 82.3 per cent.

But not all aspects of the market are in record-breaking territory, according to figures from Corelogic on Monday.

The property market analysis firm shone the spotlight on the lower trend in auction numbers.

"This week last year represented the seventh the consecutive week of capital city auction volumes being over the 2,000 mark, while over the past seven weeks, only three weeks have seen more than 2,000 auctions across the capitals," CoreLogic said.

And this trend of lower sales compared with this time last year is continuing.

There were 2,093 auctions last week, 18 per cent below the 2,565 auctions in the corresponding week of 2015.

The restriction of supply is no doubt helping to keep prices aloft, with the average for the five mainland state capitals rising by 0.3 per cent in the week and by 8.0 per cent from a year ago.

Price movements across the country are patchy, as they have been all year with falls of 0.8 per cent in Perth and 0.1 per cent in Brisbane more than offset by gains of 1.7 per cent in Adelaide, 0.9 per cent in Melbourne and 0.2 per cent in Sydney.

Annual moves are just as uneven.

Perth, still affected by the mining investment slump, was down by 5.1 per cent.

Brisbane recorded a modest annual gain of 4.0 per cent and Adelaide, where prices stagnated the year before thanks to the ailing industry, has bounced back by 5.8 per cent.

But the dominant markets remained strong, with Sydney gaining 11.1 per cent over the year and Melbourne rising by 10.2 per cent.

A key part of the background is the environment of record low interest rates and a return of confidence in the investor component of demand.

The latest Australian Bureau of Statistics estimates show the proportion of new loans going to investors rose to 47.6 per cent in July, its highest point for a year, after bottoming out at a 32-month low of 43.8 per cent in November.

An equally significant element in the background to the current price rises, and a more ominous one from the point of view of property owners, is that the flow of credit, while high, has stopped rising.

At $24.9 billion in July, approvals for non-refinancing loans were $365 million below the average for the preceding year.

In that context, the restriction of the supply of homes being put up for sale must be seen as the key to ongoing price rises and suggests the market is vulnerable to a sharp drop in prices if, for some reason, the number of sellers rises significantly.

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