A senior Labor Cabinet minister has hailed the worst auction clearance rates since COVID as a good thing – despite them falling below 50 per cent for only the third time since records began as the Government cracks down on negative gearing and capital gains tax concessions.
The combined weekend capital city auction clearance rate for the week ending on June 21 fell to 47.4 per cent, preliminary Cotality data showed.
This marked the first time since the start of COVID in April 2020 that auction clearance rates had fallen below 50 per cent, with the weekend result down from 54 per cent during the previous week and well below the 65.3 per cent level of a year ago.
Sign up to The Nightly’s newsletters.
Get the first look at the digital newspaper, curated daily stories and breaking headlines delivered to your inbox.
By continuing you agree to our Terms and Privacy Policy.
Westpac is now forecasting a 3 per cent drop in Sydney property prices this year as Melbourne values plunged by 4 per cent, which would cause overall capital city price growth to be flat in 2026.
“Tax changes announced in the Federal Budget are set to drive a major shake-up with investor demand now expected to see a sharp and sustained pull-back from mid-2026,” the big four bank said on Monday.
“With conditions already slowing in response to rising interest rates and more rate increases still on the cards, a more pronounced correction now looms.”
While it’s bad news for homeowners, given auction clearance rates are regarded as a leading indicator for house prices, Environment Minister Murray Watt said slowing prices nationally would help first homebuyers, as the Federal Government seeks to get its contentious Budget tax changes through the Senate.
“We’re not surprised to see some level of cooling in auction markets,” he told the ABC on Monday.
“If that makes it more possible for Australians to get into the housing market for the first time, that’s a good thing.”
His Cabinet colleague Tanya Plibersek, who holds the Social Services portfolio, is anticipating a property market slowdown as fewer investors competed at auctions.
“What we anticipate over time is not that house prices will continue to fall but that they will grow more slowly,” she told Seven’s Sunrise program.
“House prices have been growing too fast and that’s meant that young Australians haven’t been able to afford a home of their own.
“People just can’t keep up with that because they’ve been competing with property investors for those houses.”
But Nationals leader Matt Canavan said house price falls across Australia would be a bad thing for existing homeowners.
“I don’t want to see house prices fall across the economy, but I want to see house prices at the lower end of the market with more supply, with more affordable housing, and more affordable locations increase,” he said.
“That doesn’t necessarily mean that people who own existing houses see their prices fall but what this Government has engineered is an economic crash – a crash in economic confidence which is seeing auction rates at record lows.”
With fewer homes selling above the reserve price, sales of white goods and home furnishings are expected to fall.
But there are also broader effects on the economy, as homeowners feeling less wealthy reduce their spending, and state governments are forced to cut back on their spending as a result of weaker stamp duty revenue.
Last weekend’s figures marked only the third occasion auction clearance rates had been under 50 per cent in Cotality records going back to 2008, with the bad results including a 30 per cent clearance rate in April 2020 and 40 per cent in December 2018 following the Australian Prudential Regulation Authority’s crackdown on interest-only loans.
“This isn’t unprecedented but certainly, it’s quite rare to see clearance rates getting this low,” Cotality’s head of research for the Asia Pacific Tim Lawless told The Nightly.
This was expected to have flow-on effects for new fridges and furniture, with fewer people needing to furnish a new home.
“More broadly, you also see a downside impact like white goods, home furnishings, there is a bit of an amplifier here as you see transactional activity reduce across the market,” Mr Lawless said.
“Retail spending is probably going to be impacted by high inflation, by very low confidence.
“The housing market certainly adds to a lack of confidence.”
Falling auction clearance rate often correlate with consumer expectations of weaker property prices, AMP economist My Bui said.
“We usually think of auction rates as a leading indicator for house prices,” she told The Nightly.
“It probably leads to lower listings on the market.”
Should homeowners keep their job, prolonged weakness in the housing market could see those with a mortgage feel poorer, leading to them cutting back on luxuries like overseas holidays, given weaker auction clearances are coinciding with lacklustre consumer sentiment.
“I do think people would cut back between now and the end of this year, but the impact is going to be a bit slow to see,” Ms Bui said.
Sydney’s auction clearance rate has also fallen to 47.4 per cent, down from 52.8 per cent in the previous week, in a market where property prices have fallen by 1.1 per cent during the past four weeks.
The level was also well below the 67.6 per cent level of a year ago when the Reserve Bank had already cut rates twice in 2025.
“It implies we’ll see some further downwards pressure on prices across Sydney,” Mr Lawless said.
“Sydney has a lot more exposure to investment demand, so Sydney probably has greater exposure to the pullback in investment numbers which may be playing out here as well as the affordability challenge.”
Melbourne’s auction clearance rate of 50.6 per cent also marked a sharp dive from 57.6 per cent the previous week and 65.6 per cent a year earlier, in a market where real estate values have plunged by 0.8 per cent during the past month.
Weaker auction clearances rates are more likely to affect stamp duty revenue for state governments in NSW and Victoria, considering auctions are mainly a phenomenon in Sydney and Melbourne, the two cities receiving the biggest influx of overseas migrants.
Auction clearances rates have also plummeted in markets where auctions make up only a minority of sales with Brisbane’s rate falling to 33.3 per cent, down from 42 per cent a week earlier and 55.6 per cent this time last year, in a market where Westpac sees 9 per cent growth this year.
Adelaide’s level fell to 40 per cent, down from 56.6 per cent a week earlier and 67.5 per cent during the same week in 2025, in another strong housing market where auctions are rare and Westpac is tipping 7 per cent price growth.
House prices would be unlikely to rise again in Sydney and Melbourne, Australia’s two biggest markets, until auction clearance rates rose above 65 per cent, Mr Lawless said.
They were already falling in April before the May 12 Budget, which announced that from July 2027, negative gearing would be restricted to brand new homes as the 50 per cent capital gains tax discount was replaced with a 30 per cent tax.
The Greens, who hold the balance of power in the Senate, have indicated they want grandfathering provisions for negative gearing restricted to one investment property.
“Most property investors, they do have one or two investment properties; for the mainstream investor, I don’t think that’s going to be a significant impact on the broader marketplace,” Mr Lawless said.
Sydney and Melbourne house values were also falling in February and March when the Reserve Bank raised interest rates, ahead of the May increase that reversed last year’s relief and took the cash rate to a 15-month high of 4.35 per cent as the Iran war aggravated inflation.
Australia’s most expensive property market, Sydney, has a median house price above $1.5 million while Melbourne’s is a shade under $1m, putting it below Brisbane, Adelaide, Perth and Canberra.