High Auction Clearance Rates may not correlate to House Prices

According to property market analyst, David Llewellyn-Smith, Westpac has noted an increasing divergence between current high auction clearance rates and property prices.
This means that although there are more people attending auctions and there may be more properties being sold, it is not resulting in sharply rising property prices, Llewellyn noted.
In reviewing the average loan size from the Australian Bureau of Statistics (ABS) Housing Finance data measured against property prices, Llewellyn pointed out that the average loan size for owner-occupiers between 2011 and 2013 showed a cap on borrowing to finance property buying.
This is comparative to the rapid growth of 15% in the average loan size during the property boom of 2009 when prices last soared.
Llewellyn maintained that there is a clear correlation between current loan sizes and pricing, adding that for property prices to rise, people need to be taking on far bigger loans.
In examining the data on household credit and savings, Llewellyn argued that - post global financial crisis (GFC) - the availability of credit has tightened, and households are more averse to taking on too much debt.
He asserted that this means it’s unlikely that we will see rapidly escalating property prices for some time, despite the high auction clearance rates.
Source: http://www.smh.com.au/business/lifting-the-veil-on-the-property-recovery-20130604-2nn49.html

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