Auction market tanks as wet weather, interest rates hit hard

The clearance rate at auctions last weekend tanked as wet weather in major cities combined with rising interest rates kept buyers away.

Just 53 per cent of homes on auction this weekend were sold, a 12 per cent drop from the same time last year, according to data from Domain.

Clearance rate is calculated by dividing successful sales by the total number of reported auctions, including withdrawals and postponements.

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There was a huge drop-off in Brisbane, with just 19 per cent of properties selling and no units being sold at auction.

Sydney's clearance rate also sat at 53 per cent, having been at 68 per cent 12 months ago.

Adelaide was the only major city to buck the trend, its auction success rate sitting at 58 per cent over the weekend, a solid rise from 39 per cent.

Sydney was hit by wet weather all weekend, meaning punters were less inclined to venture out to auctions or open houses, with Melbourne also experiencing some rain.

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It also shows three straight interest rate rises this year, off the back of rampant inflation and the Middle East conflict, with buyers beginning to feel the pinch.

This time last year, the cash rate sat at 3.85 per cent, but dropped to 3.6 per cent by the end of the year.

It has shot up to 4.1 per cent, and experts fear more rises are on the way.

The federal government has made changes to negative gearing, but they will not come into effect until July next year.

Australian house prices set for downturn

Australia's housing market is teetering on the edge of a significant downturn as the pressures of soaring interest rates and stretched affordability finally begin to erode buyer demand.

Following a sustained period of extraordinary growth that has bolstered household wealth across the country, new data suggests the tide is now turning, with the nation's largest capital cities already in the early stages of retreat.

The shift in market sentiment follows a grim month for mortgage holders, as the Reserve Bank of Australia (RBA) delivered its third interest rate hike of the year.

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The 25-basis-point increase lifted the official cash rate to 4.25 per cent, effectively clawing back the relief Australians enjoyed from last year's rate cuts.

And experts have warned the pain is likely to continue.

Bendigo Bank head of economic research David Robertson yesterday suggested that the volatility stemming from the Middle East conflict is making further hikes all but inevitable.

Analysis from data provider Cotality, released today, confirms that the market is now reacting to this tightening cycle.

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Cotality Research Director Tim Lawless noted that while Australia's combined capital city markets have navigated ten distinct downturns over the last four decades, the current softening is being driven by a combination of rising borrowing costs and waning consumer confidence.

"Sydney and Melbourne are already five months into the early phases of decline, while growth is slowing across the mid-sized capitals," Lawless said.

"Listings are picking up as demand softens, interest rates are rising while affordability and serviceability pressures are biting."