Auction clearance rates in several major cities have plummeted in the wake of the Albanese government’s controversial changes to capital gains tax (CGT) and negative gearing.
Fresh property data has Australia on track to record its worst auctions week in more than half a decade, with clearance rates and prices both cratering as buyers flee the market.
Preliminary figures from real estate data collection firm Cotality painted a bleak picture as panic over how the government’s reforms will affect homeownership spreads.
In Sydney, clearance rates have fallen to levels not seen since the 2008 Global Financial Crisis, while those in Melbourne dropped to match rates during the strictest period of Victoria’s Covid-19 lockdowns.
Buyers in both cities are facing the real prospect of negative equity as prices continue to fall.
Just 47.3 per cent of homes up for auction in Sydney last week sold, Cotality found, with the success rate likely to drop further as results from Thursday to Sunday are incorporated.
The 47.3 per cent figure is already the lowest clearance rate in six years, although it is a marginal improvement on the week prior – 41.7 per cent.
Property data firm SQM Research, using a different method to Cotality, calculated clearance rates that week could have been as low as of 31.9 per cent, a level not seen since the GFC.
Clearance rates in Sydney have come in at under 50 per cent every week beginning May 17, when the government announced its planned CGT and negative gearing changes.
The slump in successful auctions has led to widespread predictions of price falls, with Commonwealth Bank forecasting a six per cent average drop.
ANZ, meanwhile, is predicting house prices in Sydney could fall as much as 8.4 per cent.
The situation appears equally challenging in Melbourne, where Cotality said the preliminary clearance rate slumped to 50.2 per cent – the lowest since the sixth week of the city’s strict Covid-era lockdowns.
House prices in the Victorian capital flatlined in May and a declining clearance rate is likely to drag the market down further over the coming weeks.
Despite the chaos, Treasurer Jim Chalmers sought to downplay concerns about the health of the housing market on Sunday.
Arguing it was “best not to overreact to data from a week or two or even a month or two”, Mr Chalmers suggested lower housing prices would be positive in the short-term as they would allow more first-time buyers to enter the market.
“The Treasury assumes that house prices will continue to grow in aggregate over the next couple of years, but a bit more slowly than otherwise,” he said.
Mr Chalmers and Prime Minister Anthony Albanese have both claimed the government’s CGT and negative gearing changes would improve housing affordability and increase supply, despite Treasury officials, analysts and the Reserve Bank suggesting any impact was likely to be minimal.