Chapter 1: What is the main topic discussed in this episode?
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The pre-Easter rush, and it was a flood of properties up for sale over the weekend past. But buyers aren't biting, at least not with the same hunger as they were. Latest data shows auction clearance rates slumping. So has there been a dramatic shift in the balance of power between sellers and buyers? And what does it mean for the price of property? Welcome to ABC Business Daily.
Welcome.
I'm Carrington Clarke. And I'm the ABC's business editor, Michael Yarder. So Michael, it's only the preliminary data at this point, but this is the lowest clearance rate for auctions since the end of 2022. And it does seem to confirm what I've been hearing from agents, that buyers have quite suddenly become harder to find. and even harder to pin down for a purchase.
What's happened? Interest rates have risen. I mean, that's the first and most important thing to note here. People at the end of last year were going into 2026, still expecting that there might even be more rate cuts. And then very late in 2025, we had that message from the Reserve Bank, hey, hey, hey,
we might not be able to cut rates again and then we saw the inflation figures two sets of numbers out in January saying inflation is pretty hot and suddenly the message turned into rate rises and very quickly the rate rise arrived in February and a lot of people were spooked by that.
We've had a follow-up in March which was again a bit of a shock to the system and there could be another one in May and it really has a lot of buyers spooked and also at a practical level, reduces how much people can borrow, maybe by up to $50,000 for a couple.
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Chapter 2: What factors are causing buyers to hesitate in the current property market?
Well, if you've ever bought a house or been in the real estate market, you'll know that when things are selling at auction at high rates, people are even buying the second or third string properties because they've missed out on the ones they've got before.
When things aren't selling at auction, that's when you get price falls coming into the market because that's when the vendor's expectations haven't been met. Something's passed in below what they wanted. They've got to go back to the potential buyers and there's a negotiation then on how much they're willing to lower the asking price to get the sale done.
And that is what we're starting to see now in the real estate market. People can't sell at auction. So it's the vendor that's having to go back to the prospective buyers and say, okay, what would you be willing and able to pay me for this house?
And that's an important point, isn't it? It's about expectations and usually the biggest determinant of the expectations of sellers is what houses were selling for.
And the problem at the moment is what people thought they were going to get if they signed up a real estate agent six weeks ago, eight weeks ago, whatever it might be, that those expectations aren't realistic in this market, it appears. And what I'm hearing from agents and from auctioneers is that you're having many situations where there either is no one showing up or registering for an auction.
People might be there to kind of have a gander, but they're not actually even willing to put their name to potentially bidding, or you've just got a situation where there's only one bidder, and often that means, obviously, that you don't get the price bidding that you would expect. There's no competitive tension.
Yeah. So the fewer bidders you have in an auction, and that's why we see things like underquoting, because
not just at the auction, but all the way through the process, the real estate agent wants to get as many people into those open homes as possible so that the people who are genuinely interested in buying look around the room and go, how much am I gonna have to pay to beat all these other people and get the property I want?
If you're seeing numbers drop off at open homes and one of my neighbors down the street is trying to sell her place at the moment and hasn't had as many people as the agent thought would be coming through the open homes, it really does then lower the pressure on the buyers to think about how much they're willing to pay.
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Chapter 3: How have rising interest rates impacted buyer behavior?
And we get some data later this week about what happened in the month of March on Wednesday.
So we're still not exactly sure how the prices are moving. And it is much trickier to work out what's happening with the prices of property than it is with equities because we obviously have a stock market where we have trading days throughout the week where we can kind of work out what people think an individual company's worth.
But it is interesting to see how we did have this flood of properties. Yes, it was getting ahead of Easter, but it was a lot of properties going onto the market at once into a situation after two interest rate hikes. How concerned do you think people do need to be about momentum building in the property market where we start to see steep property price falls?
I think at the moment we're in the phase where buyers are getting a bit cautious. And as we discussed, it's about their borrowing capacity. So if their pre-approval's expired, they've had to go back to the bank and maybe they've been told they can borrow less than they originally thought they could.
Maybe they're worried about that, about what their repayments are gonna be, all those sorts of things. Where we're not at yet seems to be a flood of sellers.
Now, SQM Research, which is a separate property data company from Cotality, which is the auction clearance rates we've been referencing, they do data on listings, and they have found that listings year on year are slightly up in Sydney and Melbourne. particularly in Sydney. So maybe that's an early reflection of A, sellers trying to get out while the going's good, as you sort of discussed.
B, maybe now that rates are rising, some people starting to be worried about whether they can afford.
They're starting to feel a little bit stretched already with what they're having to pay with higher fuel costs, but also their higher interest rates coming together. that maybe they can't have that second home loan, et cetera.
And do I get out, particularly if they're investors, do I get out? If this investment isn't stacking up, do I try and sell it while the going's good or do I risk holding on? And then the real risk is that you do get a couple more interest rate rises and then you start getting the more forced sellers rather than people who are listing because they think maybe now's a good time to cash in.
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Chapter 4: What do auction clearance rates indicate about market conditions?
But this potentially is even more, this adds to the disruption potentially of the energy supply. We've already had the Strait of Hormuz effectively closed. How dangerous is it that the Houthis can effectively close the Red Sea as an avenue for that travel?
Yeah, it's an incredible escalation in the threat, not just for energy prices, mind you, but the Red Sea leads to the Suez Canal. And we saw when that ship blocked the Suez Canal, what a disruption and increase in shipping costs that caused by ships having to travel all the way around Africa. to get from Europe to Asia and vice versa. So this is a major threat.
They only have to launch a few missiles for the cost of insurance to go up on that route, which is already what's crippling the transit through the Strait of Hormuz, just the unavailability of insurance. One of the best commodity analysts, really interesting notes she puts out, is RBC's head of global commodity strategy, Halima Croft.
She put out a note a couple of weeks ago warning that this was a major risk and that it would, quote, push oil prices several legs higher in the current environment. Not fortunate for the targets of the attacks, but so far the Houthis have directed their missile attacks on Israel. We've already seen oil prices tick up a few percentage points since the weekend. on this threat.
If they start launching missiles into the Red Sea or drones into the Red Sea, then the $115 a barrel US for oil that we're seeing today could quickly rise well beyond that. And there are some analysts saying $150, maybe even $200 is not impossible.
Yeah, because we keep talking about the state of hormones usually seeing about 20% of the world's supply of crude and natural gas travel through there. But at the moment, we haven't seen a reduction in 20% of the flow because there's been some redirection. There's also been countries releasing their reserved, other countries have increased production who don't rely.
So the best estimates I've seen at the moment, about 5% lower supply of oil at the moment on international markets. The question, of course, becomes if this goes on for a longer period or we see another, that new route also interrupted. that could be catastrophic for global energy supply, couldn't it?
Yeah, it's about four million barrels a day going through the Red Sea, according to Halima Croft. So if you take out even half of that because it can't transit, I mean, perhaps the Saudis can reroute some of the shipping away from the Red Sea, and again, around Africa to get to Europe, or obviously if it's going to Asia, it doesn't have to go through there.
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Chapter 5: How are seller expectations shifting in today's real estate environment?
But some of the oil pipelines that are taking Saudi oil from the east, where Iran is, to the west, to this relatively safer area in the Red Sea, they've also been attacked by the past, by the Houthi rebels. So they're in a position to cause a lot of disruption, not just to shipping, but to Saudi oil export facilities and pipelines.
And if that happens, again, oil prices heading towards $200 a barrel is not a fantasy. I mean, we're not there yet, but it's certainly not an impossibility. Well, there's no exit ramp currently obvious to Donald Trump or anyone else it would seem. And a lot more US troops on the ground or heading for the Middle East. So no exit ramp in sight so far.
Michael, thank you so much for joining us on ABC Business Daily. A pleasure as always, Carrington. And that is it for today's episode of ABC Business Daily. We'll be back with another episode tomorrow. Remember to never miss an episode. Make sure you're following ABC Business Daily on ABC Listen or wherever you get your podcasts.
If you'd like to send in a question, we love a voice note in particular. Email abcbusinessdaily.com. at abc.net.au Catch you next time Michael See ya