Positive signs for Autumn season - John McGrath

The Autumn auction season is now in full swing, with more than 2,500 homes nationwide going under the hammer each week.

Early signs are very positive, with the national clearance rate hovering around the mid-65% mark in February. That’s about the level we saw in early Spring last year before the market began to cool off.

Higher auction volumes in March may test this strength, however, the first rate cut from the Reserve Bank is likely to boost market sentiment and this should spur on buyer activity.

Last month’s cut was the first since November 2020. A 0.25% cut will not make a material difference to household budgets, nor buyers’ ability to secure enough finance to buy a home affordably.

But it does signal the start of a downward trend in rates (as long as inflation continues to fall) and this will give people confidence that we are past the worst it’s going to get in this cycle.

I’m expecting a spike in buyer activity following this first cut, and a more meaningful increase once we’ve seen three or four rate reductions.

However, it’s crucial that buyers assess their budgets carefully and not assume that more rate cuts will come quickly. The RBA Governor, Michele Bullock, has already stated that the RBA Board thinks the finance market’s expectations of three more cuts by mid-2026 are too ambitious at this stage.

So, it’s important to only buy at a price level that you find comfortable to manage over the long term.

This Autumn season may be a good time to buy given price weakness in many areas since November.

Between November 1 and January 31, CoreLogic data shows home values fell 1.4% in Sydney, 2% in Melbourne, 0.8% in Hobart and 0.5% in Canberra. The pace of growth in the rising markets of Perth, Brisbane and Adelaide also slowed substantially over this period, giving buyers some breathing room.

Now may be the time to capitalise on this weakness before further rate cuts occur.

More rate cuts – whenever they come – are likely to push up home values. In fact, CoreLogic research shows that for every 1% cut to the cash rate, dwelling values rise by an average of 6.1%.

Some markets are more responsive to rate cuts, with the research showing that popular family suburbs with higher median values tend to get a greater price uplift as rates go down.

In Sydney, for example, the research shows a 1% rate cut pushed median house prices up 19% in Leichhardt and the Sutherland-Menai-Heathcote area, 18% in Warringah and 17% in Parramatta.

In Melbourne, median house prices rose 18% in Whitehorse-West and Essendon and 17% in Manningham-West and Boroondara.

In Brisbane, median house prices lifted 5% in Sunnybank, Nathan and Brisbane Inner-North.

In Hobart, median house values rose by 6.5% in the inner city and 5% in the city's North-East.

In the regions, median house prices rose by 12% in Wollongong, almost 10% in Kempsey-Nambucca, 6.5% in the Gold Coast hinterland and Newcastle, and 6% on Tasmania’s South East Coast.

CoreLogic points out that median values in many of these suburbs are currently well below their peaks.

So, families seeking forever homes in these popular areas may be smart to buy this Autumn before a rate-inspired price upswing begins.