Clearance Rate Drops Close To A Three-year Low

The Sunday Age

Sunday August 10, 2008

Chris Vedelago

INTEREST rate cut? What interest rate cut? Just as the market was starting to see the light at the end of the tunnel, it turns out that what the Reserve Bank can give, the private banks look increasingly likely to keep away.

While analysts are tipping there could be up to three cuts in the official interest rate on the cards, so far two of the big banks - ANZ and Westpac - have indicated that little or no relief could be passed on to consumers, citing continuing fallout from the global credit crunch.

"The banks have got another agenda than the Reserve Bank, of course, and Mr and Mrs Joe Mortgage-taker will end up responsible for covering the banks' tails," said buyer's advocate Chris Koren, of Morrell & Koren.

But apart from the unfairness of it raising hackles, there are genuine concerns about what effect such a move will have on already battered confidence in the property market.

"The market has shown that it has cooled in response to the interest rate increases of the RBA and the private banks, so they've got the desired reaction," said Enzo Raimondo, chief executive of the Real Estate Institute of Victoria. "If the private banks failed to pass on an interest rate reduction, it would not only make (people) really angry, but it would also send very confusing signals to the local housing market."

The REIV reported a clearance rate of 60% for the 396 auctions held around the city yesterday, down 3 percentage points on last weekend and more than 5 points below the average for the year to date.

The rate is teetering perilously close to a new low - the last time the Saturday clearance rate was below 60% was in mid-2005 - and seeming to send a message that buyers aren't happy.

In yesterday's market, after-auction negotiations led to the vendor of 81 Henry Street in Prahran meeting the $700,000 reserve after two-way competition stalled at just $10,000 less. Bidding for the two-bedroom brick house had opened at $650,000 through Biggin & Scott.

There was no sale under the hammer or afterwards for the restored Edwardian at 11 Mozart Street in St Kilda, which passed in on a vendor bid of $1.35 million. The four-bedroom property, which had been quoted at $1.37 million to $1.5 million, failed to attract any bids or later offers.

"It's typical of what's happening at the moment; there's just no urgency," said Hocking Stuart agent David Sullivan. "But it's a good home so it will (eventually) sell."

Two bidders just couldn't get the price high enough to seal the deal with the vendor of 14 Myamyn Street in Armadale, a four-bedroom period house with a reserve estimated at $4.3 million or higher. The auction opened at $3.8 million and strong bidding saw the property hit $4.12 million before being passed in, according to an observer.

While Kay & Burton declined to comment on this Armadale auction, the top-end agency reportedly did $45 million worth of auction, private and off-market sales in the last 10 days of July, nearly $10 million more than for the same time in the bumper market of last year.

Elsewhere in Armadale, four bidders drove the sale price of an apartment at 6/7 Elgin Avenue to $422,000, or 17% above its reserve, making it one of the strongest sales results reported yesterday. Hocking Stuart had quoted the property for $320,000 to $365,000.

There are 487 auctions scheduled for next weekend, more than 27% below the level for the same time last year and nearly 3.5% below the stock levels in 2006.

Call Market Wrap with your auction results, tips and comments on 9604 1188 between 3pm and 6pm on Saturday.

© 2008 The Sunday Age

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