House prices may drop after prolonged auction slumps

National Auction Clearance Rates Decline Amid Uncertainty

A national slump in auction clearance rates is causing concern among homebuyers and property experts alike. The combined capital city clearance rate has remained below 60 per cent for six of the last eight weeks, according to fresh data from Cotality. This decline comes as buyers become increasingly hesitant due to a mix of local and global uncertainties.

The latest figures show a slight increase after a low of 57.5 per cent following the 2026 federal budget’s sweeping tax reforms. However, the market has yet to fully recover from a series of rate hikes and ongoing geopolitical conflicts. These factors have created an environment where many potential buyers are choosing to wait rather than commit.

Regional Market Performance

Brisbane experienced the most significant drop compared to the same weekend last year, with a preliminary clearance rate of just 45.7 per cent. In contrast, Sydney saw a steady rise in its clearance rate, reaching 56.9 per cent, up from 49.2 per cent the previous week. This was the lowest rate seen since the early weeks of the COVID-19 pandemic.

Melbourne’s clearance rate hit 60.4 per cent, staying above the national threshold for the second consecutive week. Adelaide had the highest rate among all capital cities at 72 per cent, despite a slight decrease in auction volume by 8.8 per cent. Canberra also maintained a stable auction market, with a clearance rate of 54.3 per cent.

Expert Insights on Market Trends

Property experts anticipated a sharp drop in clearance rates following the federal government’s changes to negative gearing and capital gains tax (CGT) discounts. However, the current data suggests a long-term trend of caution among buyers and sellers.

Chris Gray, a property investment guru and chief executive of Your Empire, explained that the property market is often driven more by sentiment than financial logic. When buyers feel uncertain about their future—whether it’s mortgage repayments, job security, or the general state of the world—they tend to wait before making a purchase.

“This hesitation directly affects auction clearance rates,” Gray said. “It’s a natural part of the cycle, and it won’t last forever.”

Factors Contributing to Market Volatility

The threat of another rate rise in September and uncertainty over the US-Iran conflict have added to the existing challenges. These factors have increased the sense of instability in the market.

Gray noted that homebuyers may not feel comfortable committing when they believe the rules could change. This uncertainty could lead to a period of continued hesitation while the market adjusts to the new landscape.

Potential Impact on Property Prices

While there may be a short-term slump in property prices as buyers reduce their offers, the impact is expected to be minimal. Gray suggested that changes could be as small as $50,000 on a $1 million property.

Some areas may experience more pronounced price drops, particularly those with structural disadvantages such as poor location, lack of parking, or oversupply in the immediate area. These properties are more sensitive to shifts in buyer sentiment.