Auction clearance rates were steady in Sydney and Melbourne last week, with agents describing the current market as strong. However, higher supply and concerns about the looming new bank levy have kept many buyers in check.

A total of 76.2% of Sydney homes up for auction last week were sold, while Melbourne’s comparable rate dipped to 77.3%, according to preliminary data from CoreLogic. In the previous week, the final clearance rates were 74% for Sydney and 77.9% for Melbourne.

Final clearance numbers are released midweek and are often several percentage points lower than preliminary clearance rates.

Andrew Wilson, chief economist of the Domain Group, said the market was still very strong, mainly due to low interest rates. “The markets are bubbling along quite well,” he said to The Australian Financial Review. “Demand is still ahead of supply… there are skyrocketing rents in Sydney. There is strong migration... and all that nonsense last year about oversupply proved to be just that – nonsense.”
If the Reserve Bank slashes rates again, housing demand would remain steady and possibly rise again, said Wilson. However, this time banks would be able to deliver a neutralising effect by increasing rates.

Economists are expecting the Reserve Bank to keep the cash rate on hold again this month, though some expect a rate cut in the third or fourth quarter of 2017 to about 1.47%, according to Bloomberg. A slight increase to 1.51% is expected after that, most likely in early 2018.

“We are still seeing good numbers at open homes and this is a strong result. However there appears to be confusion within the marketplace,” said Maria Magrin, agent at Belle Property Australia. “Buyers are wondering if the banks will lift mortgage rates again due to the bank levy, plus with so much talk of housing affordability, some buyers are starting to worry that we’re in a bubble and prices will eventually drop.”

To accommodate strong demand by speeding up supply, Anthony Roberts, NSW Minister for Housing and Planning, introduced the Greenfield Housing Code last Friday. This would allow homes in greenfield areas in western Sydney to be approved in 20 days compared to the state’s average of 71 days.