Auction results show buyers finally responding to lower interest rates

The property market has started 2013 on a good note, with experts saying strong clearance rates are a good sign the market is beginning to respond to last year’s series of interest rate cuts.

Strengthened property sales also serves as another reason to believe the Australian economy is improving, with economists also pointing to strong corporate retail results, steady employment, rising consumer sentiment and the highest sharemarket results in years.

“I think we’re all a little seduced into expecting an instant reaction from the market from interest rate falls,” says Australian Property Monitors chief economist Andrew Wilson.

“But what we’re seeing right now is perhaps the real impact of those historically low interest rates.”

Last weekend was the second reporting weekend for the property year so far, and it’s already shaping up to be a strong one.

According to the Real Estate Institute of Victoria, Melbourne – the city where most auctions are held – recorded a 70% clearance rate compared to 67% last weekend, and 64% during this same weekend in 2012.

“The reported lift in consumer confidence last week will be a positive influence on the residential market over the remainder of summer and autumn,” chief executive Enzo Raimondo said in a statement.

“The improved confidence is also evident in this weekend’s results, which are an improvement on last year’s trend.”

The city recorded 437 auctions, with 306 sold. Next week is where the selling really begins, however, with the city expecting a massive 950 auctions to go ahead.

Results were similarly positive in Sydney, with the city recording a clearance rate of 71% from 204 reported auctions, compared to last year’s result of just 54.5%

Property analysts have been waiting to see whether lower interest rates would actually flow through to the residential property market, as the spring selling season in 2012 finished with a huge boost to sales.

But now, Wilson says, the number of auction sales is actually quite surprising.

“Sales are tracking ahead of the same time last year in Sydney and Melbourne, and listings numbers are quite sharply increasing over the next few weeks.”

“That’s a sign things are becoming much more confident in the market – one of the things that characterised the market last year was that the number of listings was low.”

Wilson says the rising listings figure is a good sign sellers are becoming more confident, which should give the market a good boost before the colder weather sets in during May and June.

“It’s still early in the season and we’ll need higher numbers to fully get the picture, but based on the evidence so far the market looks like it’s lifted off fairly early.”

Are we still in a property bubble or have prices found equilibrium? Read our property feature today to find out.