Australia's national housing market is softening as rising interest rates and increased stock reduce buyer demand and lower auction clearance rates.
This trend indicates a shift in market power from sellers to buyers. As borrowing capacity shrinks, the frequency of successful property auctions declines, signaling a potential cooling of price growth across the country.
Angus Moore, senior economist at REA Group, said the market is currently "quite soft." According to Moore, any auction clearance rate under 50 percent [1] is indicative of a soft market.
The decline in activity is linked to monetary policy changes. Moore said that three interest rate hikes [2] have occurred in 2024, which has directly impacted buyer demand and borrowing capacity.
These rate increases have forced prospective home buyers to re-evaluate their budgets. An analyst for MSN Money said that successive rate hikes are eating into the amount of money buyers can borrow to secure properties.
Beyond interest rates, an expanding supply of homes has further reduced demand. The combination of more available stock, and less available credit, has created an environment where properties are less likely to sell at auction.
Moore said these factors are influencing housing market conditions more broadly, moving the market away from the high-demand peaks seen in previous periods.
“"It is obviously quite soft, anything under 50 per cent is obviously quite soft."”
The convergence of higher borrowing costs and increased housing supply suggests the Australian market is transitioning from a seller's market to a more balanced or buyer-led environment. When clearance rates drop below the 50% threshold, it typically indicates that sellers are overpricing their assets relative to what buyers can afford under current interest rate pressures.
