Rate fails to spur home buyers

The first interest rate cut in seven years hasn’t sparked home buyers’ attention yet, with auction clearance rates dropping in Sydney.

The first interest rate cut in seven years hasn’t sparked home buyers’ attention yet, with auction clearance rates dropping in Sydney.

Australian Property Monitors says clearance rates in Sydney dropped from 46.5% last week to 44.7%, well down from the 60% rate the city enjoyed for the same time last year. But the news might not be all bad – industry officials say auction attendances improved despite the poor weather.

Results in other capitals remained stable, with Brisbane maintaining a clearance rate of 37%, Adelaide 64%, and Melbourne rates increasing five percentage points to 64%.

Property industry leaders say the interest rate cut will improve the outlook for the sector, arguing buyers now have more confidence regarding housing affordability.

But CommSec chief economist Craig James says one cut isn’t enough to gain buyer’s attention, and while some more rate relief is expected, any long lasting help to the housing crisis is still a long way off.

“It’s going to take more than one rate cut to really spur home buying and building in coming months. Higher house prices and rising interest rates over 2007 and 2008 have led to greater caution and selectivity by buyers.”

“Two small rate cuts will probably only lead to a modest recovery in the housing market,” he says.

Don’t miss tomorrow’s property special at SmartCompany, which will include a state-by-state guide to property hotspots and advice on your post-rate-cut buying strategy.