Reopening the auction doors may not be enough to stimulate more activity in the housing market, since the impacts of COVID-19 on consumer sentiment and other economic sectors might take a little longer to dissipate, according to an analysis by CoreLogic's latest analysis.
Eliza Owen, Head of Residential Research at CoreLogic, said that the easing of COVID-19 restrictions across Australia occurred at a time when jobs have already fallen by 7.5% while wages fell 8.2%.
"In the current market, consumer confidence is picking up from the lowest levels since the start of the recession in the 1990s, and prices are expected to start falling," she said.
Owen said Melbourne, where 46% of all the capital's auctions took place last year, had already registered a 0.3% drop in April.
"This means that the auction method may be less popular with sellers and agents," she said.
Read also: Auction withdrawals return to normal?
Social restrictions imposed to curb the spread of COVID-19 have led to a sharp increase in withdrawals from the auction market, resulting in a significant drop in customs clearance rates. Since the auction ban, withdrawal rates have reached 45.8%. This is approximately eight times the five-year average rate of properties withdrawn before COVID-19, which was 5.7%.
Owen said that liquidation rates and house prices were historically closely correlated. However, what is currently going on in the auction market is unique, given that it is the sharp increase in withdrawals that has pushed liquidation rates down.
"At their nominal value, the sharp drop in liquidation rates implies that house values ??could follow a similar trend, however, there is a good chance that the relationship is at least temporarily disconnected due to the rate of high withdrawal causing liquidation rate to artificial lows. ", she said.
Even with the lifting of social restrictions and the reintroduction of auctions, Owen said the housing market needs a boost.
"Ultimately, being able to look at real estate and bid publicly on real estate does not increase the ability to buy real estate. The real estate industry is more likely to see a recovery when other sectors return to normal business and consumer sentiment improves from its current lows, "she said.
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