Auction clearance rates plummet to lowest level in six years amid buyer hesitation

Australia's residential property market is signalling a sharp downturn in buyer confidence, with auction clearance rates falling below 50 per cent for the first time since the onset of the COVID-19 pandemic in April 2020.

Data from property research firm Cotality shows the weighted average clearance rate across Australian capital cities has dropped to 47 per cent, with analysts predicting the final figure could fall even lower once all transactions are recorded.

Unprecedented decline in six years

Tim Lawless, research director at Cotality, suggested the actual clearance rate could settle in the "low-to-mid 40 per cent range" — a level not witnessed since the initial lockdowns of 2020.

"We're probably seeing the final clearance rate around the low-to-mid 40 per cent range, which again we haven't seen since the initial lockdowns of the global pandemic," Mr Lawless said.

The deterioration marks a significant shift in market sentiment across Australia's major property markets, including Sydney, Melbourne, Brisbane, and Perth, suggesting sustained pressure on housing demand despite recent stabilisation in interest rates.

Policy changes reshape investment landscape

Cotality attributes the collapse in clearance rates to recent changes in taxation policy affecting property investors. The research firm predicts "a further loss of momentum in the pace of growth in housing values" as the market adjusts to reforms around negative gearing and capital gains tax treatment.

These legislative changes have fundamentally altered the investment calculus for many property buyers, particularly those seeking to leverage rental income and tax deductions as part of their wealth-building strategy. The timing of the policy shift has coincided with elevated cost-of-living pressures, creating a "double headwind" for property market activity.

Cost-of-living pressures persist

Beyond taxation policy, affordability challenges continue to weigh heavily on purchasers. In Sydney and other major capitals, the combination of high property prices and elevated living expenses has constrained buyer participation at auctions.

The sustained decline in clearance rates reflects a shift from the frenzied bidding conditions that characterised much of the post-pandemic property boom. Where auctions once attracted multiple bidders competing aggressively, vendors are increasingly facing situations where properties fail to sell or achieve reserve prices.

What the figures mean for the market

A clearance rate below 50 per cent traditionally signals a buyer's market, where purchasers hold increased negotiating power and vendors face pressure to accept lower offers or improve conditions to attract interest.

• The previous clearance rate decline of this magnitude occurred during the initial pandemic lockdowns when market uncertainty was at its peak
• Current weakness appears driven by policy changes rather than external economic shock, suggesting different market dynamics at play
• Lower clearance rates typically precede softer growth in property values as vendors adjust expectations downward

The data carries significant implications for household wealth, mortgage stress, and consumer confidence across the nation. For prospective buyers who have been waiting on the sidelines, the shift represents the first genuine cooling in the housing market since the rapid price growth of recent years.

Source: ABC News