The ScoMo effect on Sydney's auction clearance rates

The ScoMo effect on Sydney's auction clearance rates
Jonathan ChancellorDecember 7, 2020

A number of happy Sydney auction sellers are reaping the real estate rewards of the Morrison Government’s surprise federal election victory.

In a market rebound being dubbed “The ScoMo effect”, homes which had recently been passed in during the two-year housing slump sold at a price almost $400,000 higher just seven weeks later in light of record low interest rates, a loosening of lending regulations and the vital removal of the threat of Labor negative gearing and capital gains policies set to punish investors, owners and renters.

Economists factoring a Labor victory into their housing forecasts for the winter outlook said Prime Minister Scott Morrison’s re-election had removed a massive negative facing an already jittery property market.

“Given the difficulty in predicting the election, our house price forecasts had allowed for a 50 per cent probability (i.e. 50/50 Labor would win) of an 8 per cent additional drag on prices in Sydney,” AMP chief economist Shane Oliver said. “Now it’s zero and we need to remove this from our forecasts.”

Ray White selling agent Shaun Burro pointed to a massive spike in auction clearing rates as “a complete U-turn” in the market.

The May 18 election day clearance rate sat at around the low 60s and is now often in the 70s, with a 78 per cent success rate advised last Saturday. The rebound was illustrated in an unrenovated three-bedroom Redfern terrace (below) passed in at $1.6 million on the actual day of polling.

The ScoMo effect on Sydney's auction clearance rates

A buyer emerged earlier this month paying $1.971 million, reflecting a $370,000 jump in just seven weeks.

Buyers’ agent Rodney McLoughlin at TBAS Buyers Agents was at the original auction. “Up to the election outcome, we were witnessing one, maybe two active bidders at auctions, with properties likely selling around the agents’ price guide,” he said.

However, the post-election auctions are attracting three to four active bidders, with properties often selling around 10 per cent over the price guide, he said. “Exceptional properties are now selling around 15 per cent over the agents’ guide,” he said.

Mr Oliver also cited the action under the hammer as evidence of the ScoMo effect.

“So far it’s mostly evident in the auction market as other data comes out with a much longer lag,” he said.

“Auction clearances may relate to only a portion of the market but they are usually a pretty good guide to the broader market.”

SQM property research analyst Louis Christopher said there are more buyers in the market compared to the time prior to the election, citing the win, APRA announcing their loosening lending and the interest rate cuts as the three main factors.

Kellyville couple Clive and Jeanette Desira are attempting to capture on the heightened auction confidence with a July 31 marketing campaign with Ray White Castle Hill to sell their five-bedroom Springwood Boulevard (below) home.

The ScoMo effect on Sydney's auction clearance rates

The home, built by the couple on a 605sq m block in 2015, was listed before the election without success but Mr Desira is now feeling more optimistic.

“I think the market has changed,” Clive said.

“There’s a little bit more confidence since the return of the government, plus lower interest rates and also the changes in the way banks assess loans.

“I believe buyers’ confidence is back. I think we’ll see stock moving.”

CoreLogic’s June home value index revealed Sydney’s prices rose 0.1 per cent last month — the first month without a price fall in two years.

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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