Over recent weeks, leading Sydney auctioneer Tom Panos has warned that Sydney’s housing market is under stress amid a surge in listings and buyers experiencing affordability constraints following recent interest rate hikes.
Three weekends ago, Panos declared that the “market has changed”, noting that “buyer depth is diminishing” and “fear is gripping the market” amid rate rises and inflation.
Two weekends ago, Panos warned that “it is super clear that we are changing direction in the marketplace and whilst buyers were chasing the market up, houses now look like they’re chasing the market down”.
Cotality’s preliminary national auction clearance rate for the past weekend was only 60.9%—the lowest result since December 2022, “when housing values were in the midst of a short but sharp correction as interest rates rose from pandemic lows”.
The result was weighed down by the highest volume of auctions since December 2021, with 4,062 homes going under the hammer.
Source: Cotality
Melbourne’s preliminary clearance rate fell to 63.5% across 1,887 auctions. It was Melbourne’s highest number of auctions held since December 2021 and the city’s lowest preliminary clearance rate since April last year.
Sydney’s preliminary clearance rate fell to 57.9% across 1,518 auctions, the city’s highest volume since December 2021. It was Sydney’s lowest early auction clearance rate since December 2024.
Commenting on the weekend’s results, Tom Panos noted that “we’re seeing for the first time even the lower price points actually being impacted” by the war in the Middle East and higher interest rates.
“When you actually have fear, when you have a big thing, people get paralysis”, Panos added. “They stop actually doing things. And I’ve got to say to you, that’s what we’re doing”.
Cotality’s daily dwelling values index for Sydney has turned lower, declining by 0.1% over the past 28 days:
As illustrated below, there is a strong historical correlation between Sydney’s auction clearance rate and dwelling value growth. Thus, the lowest preliminary clearance rate since December 2024 suggests values will decline further.
Earlier this month, the founder of SQM Research, Louis Christopher, forecast that Sydney dwelling values would fall by between 2% and 6% in 2026:
However, SQM’s “base case” forecast assumed the official cash rate would rise once more this year to 4.35%.
The latest pricing from the interest rate futures market suggests that the official cash rate will rise to 4.85% by the end of 2026, an 18-year high:
Under “Scenario 2” above, SQM Research forecasts that Sydney dwelling values would fall by between 5% and 9% in 2026 under such interest rate settings.
Based on the slump in the auction clearance rate, the outlook for rising interest rates, the decline in Cotality’s daily index, and SQM Research’s forecasts, Sydney’s housing market is beginning to crack.
