Australian Auction Clearance Rates Hit Weakest Run Since 2011 as Housing Market Cools

Australia’s housing market is facing growing pressure, with national auction clearance rates averaging below 50% since June, marking their weakest run since 2011, according to JP Morgan. The sustained decline has raised concerns about the outlook for house prices, with higher interest rates and proposed changes to property tax rules adding uncertainty.
JP Morgan analyst Tom Kennedy noted that auction clearance rates have historically served as a leading indicator of annual house price growth. The latest figures suggest further price adjustments may lie ahead, although the extent of the decline remains uncertain.

House Price Outlook Weakens

Cotality’s median house price measure is currently around 4% below its peak, while its hedonic price measure, which accounts for property-specific characteristics, is down closer to 5%.
Kennedy expects the remaining adjustment to be less significant, forecasting a peak-to-trough decline in the mid-to-high single digits. However, he cautioned that the September interest rate increase by the Reserve Bank of Australia (RBA) has not yet been fully reflected in the available data.

The delayed impact of higher borrowing costs could place additional pressure on housing demand and prices in the coming months.

Tax Changes Add to Housing Market Uncertainty

Proposed federal government changes to negative gearing and capital gains tax are creating another source of uncertainty for property investors.
Kennedy said the changes could make housing less attractive to speculative investors, with investor credit growth and loan demand already shifting lower.
However, the impact on prices may not be straightforward. Existing investors who retain grandfathered negative gearing benefits may have less incentive to sell, potentially resulting in a greater adjustment in transaction volumes than in property prices.
Auction Activity Falls Sharply
The slowdown is also evident in housing market activity. Total auction volumes are down 30% compared with last year, approaching levels last recorded during the 2022–23 interest rate hiking cycle.
Lower transaction volumes matter because property turnover influences mortgage lending activity and household spending. Even if house prices decline less sharply than expected, reduced buying and selling activity could still affect the broader economy.
What Investors Should Watch Next
Investors should monitor auction clearance rates, property transaction volumes and the impact of higher interest rates and proposed tax changes to assess whether the housing slowdown deepens or stabilises.
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