Auction clearance rates have continued their downward trajectory thanks to the tax reforms announced in the federal budget. This continues a trend that began with the Iran war and three consecutive rate rises.
Auction clearance rates have slumped to 31.1% in mid-May, the lowest rates recorded in NSW since early 2020 during the pandemic. The first week of May saw just 37% of auctions clearing, in sharp contrast to the same time last year when clearance rates sat at 65%.
Real estate agents have reported that there has been a drop in demand from investors with the blame pointed at capital gains tax changes and restrictions on negative gearing.
With the overall downturn of the property market continuing with little sign of changing course, many home buyers are fearful of paying too much.
Home buyers are not affected by the tax changes, but with prices falling in Sydney’s blue-chip suburbs some are wondering if that trend will expand into the broader market. As such, many potential buyers are delaying their plans.
SQM research revealed that of the 881 auctions scheduled on the third week of May, 149 were sold prior to auction, 144 were rescheduled, and 399 were readvertised as a private treaty sale.
It is important to remember that it is still too early to measure the real impact of the tax reforms as the market was already slowing down beforehand.
The goal of these tax reforms is to reduce investor activity, which will weaken overall demand and create a less competitive environment.
Industry spokespeople, like Louis Christopher from SQM Research, suggest that a reduction in investor activity will cause pain for renters in the long-term by reducing rental supply thus increasing rents.
It has been forecast by SQM Research that the Iran war would cause Sydney house prices to fall by as much as 6% over the course of 2026. That has now increased to 12% after the budget announcements.
If you’re thinking about purchasing in the coming months or want to understand how current conditions affect your borrowing options, our team at It’s Simple Finance is here to help. Reach out today for a no-obligation conversation.