Auctions market weakens as banks continue to raise rates outside RBA decisions

The auctions market has already been impacted by the ANZ’s shock move to raise interest rates last Friday, with experts warning the turmoil can only continue as the banks decouple their rates decision from Reserve Bank of Australia’s monthly meetings.

While clearance rates usually fall in the week following Easter, the Real Estate Institute of Victoria has highlighted how the ANZ decision to lift rates by 0.06%, despite the RBA making no movement this month, will impact timid first home buyers.

“This weekend’s result provides a clear indication that further interest rate increases by the banks would negatively impact demand and confidence in the residential property market,” REIV chief executive Enzo Raimondo said in a statement.

Melbourne recorded a 55% clearance rate with 369 total auctions, compared to 962 at this time last year – although the difference in Easter dates means there cannot be a direct comparison. There were just under 1,000 listings in the week before Easter this year.

Sydney recorded a 55% rate, while Adelaide and Brisbane recorded rates of 45% and 37% respectively.

SQM Research managing director Louis Christopher says the actual increase doesn’t matter so much as the impact the precedent has on sentiment – home buyers now know banks can raise rates at any time.

“The banks over the last few years have been getting more and more power over interest rate settings. And for potential first home buyers, this is a very scary thing.”

“Potentially, the banks could decide ‘we’re going to lift rates by X’ and that creates a lot of uncertainty.”

However, Christopher does suggest bank rate rises can be mitigated by a rate cut by the RBA, as long as the banks don’t refuse to pass it on.       

“That’s the problem we have now. A lot of uncertainty, and it’s creating a negative effect for the overall economy.”

“In time, people will get over the shock factor but nevertheless it is going to have effects on the property market.”

“Effectively, the RBA’s power base has been corroded.”