Sydney, Canberra Out Bid in Auctions

Sydney and Canberra had a bumper number of auctions on the weekend, returning to 2019 levels with the best clearance rates in the country.

It was the busiest week for auctions since 19 April with 1,164 properties scheduled in Australia, up 39 per cent from the week before at 711, according to Corelogic.

Sydney had 532 auctions with a clearance rate of 67.3 per cent compared to 534 auctions and 66.4 per cent in 2019.

Canberra had 40 auctions at 75.8 per cent up from 39 auctions at 48.7 per cent in the year before.

However, the number of homes on the market was down on average 23.4 per cent across the country. Home values dropped 0.7 per cent over the past month.

Related: House Price Outlook More Optimistic—UBS

Auction results 14 June 2020

^{^Source: CoreLogic}

This was bad news for banks and households according to Moody’s Investors Service analysts.

“The combination of reduced housing activity and lower house values highlight the potential for a weaker residential property market, which will add pressure to the banks' asset quality, a credit negative,” Moody's analyst Tanya Tang said.

New housing finance approvals also fell 4.8 per cent in April, the sharpest month-on month decline since 2015 according to the Australian Bureau of Statistics.

The analysts said banks and households were still vulnerable from further Covid-19 fallout as the RBA predicted unemployment to rise to 10 per cent.

“The performance of housing loans is a key driver of Australian bank asset quality, given that mortgages account for about two-thirds of banking system loans,” Tang said.

“And while losses on residential mortgages have historically been exceptionally low, such loans present a key risk given high levels of indebtedness among households.

“As at December 2019, household debt made up 186.8 per cent of annualised disposable income, which creates a vulnerability for households to a rise in unemployment.”