Property auctions are running hot – but at what cost?

Auction clearance rates across the combined Australian capitals fell incrementally in the week ending 3 August.

Cotality data published on Sunday shows a combined capital clearance rate of 71.3%, with Sydney seeing the highest rate at 74.9%, followed by Melbourne and Brisbane.

A total of 1,199 out of 1,573 properties were sold, with Melbourne taking the lion’s share of 582 properties sold.

This latest national clearance rate was down from 74.7% in the prior week, although this was when the rate surged to a more-than-12-month high.

In fact, Melbourne’s clearance rate is still up nearly six percentage points since mid-February, per Domain data, while Sydney is up a tidy three percentage points.

House prices have rallied in line with these buoyant clearance rates.

National housing values rose by 0.4% in June, according to PropTrack, marking the sixth straight month of gains and signalling renewed momentum across the country’s housing market.

Capital city markets were up an average of 0.4% month on month in June, with Adelaide posting the strongest monthly rise of 0.6%.

Melbourne prices continued to recover by 0.3%, although these were still 1.1% below their peak.

Does the property market need a rebalance?

While the data points to a resilient housing market with strong buyer demand, there are growing calls to rebalance the property ladder in favour of younger people trying to get their feet on the first rung.

The Australian Council of Trade Unions is calling for reforms to the current negative gearing strategy, which makes losses on investment properties tax deductible. The ACTU is also calling for a reduction in capital gains discounts.

These existing tax policies have been accused of unfairly favouring property investors at the expense of first-home buyers.

“You can’t address living standards without addressing housing affordability, so we are going to bring to the roundtable proposals that negative gearing and capital gains tax discounts and benefits should be limited to one investment property,” ACTU secretary Sally McManus told The Australian over the weekend.

McManus criticised the current tax regime for subsidising investors with multiple investment properties, although other stakeholders believe incentivising these investors is necessary to support housing supply.

Her comments come in advance of the Labor Government’s Economic Reform Roundtable scheduled for 19-21 August.

Dozens of industry leaders have made their voices heard ahead of the roundtable, which will be hosted by Labor Treasurer Jim Chalmers.

Anja Pannek, chief executive of peak mortgage broking body the Mortgage and Finance Association of Australia (MFAA), has made a bold call to raise consumption taxes while abolishing stamp duty and payroll taxes.

Little political will to temper house prices

Despite the obvious tax advantages afforded to property investors, first-home buyers have arguably more government support than ever before.

Key measures include the First Home Guarantee, which allows eligible buyers to purchase a home with as little as a 5% deposit without paying Lenders Mortgage Insurance (LMI).

Many states – including NSW – provide stamp duty concessions or exemptions for first-home buyers, greatly reducing upfront costs.

Meanwhile, the Labor government has pledged to build 1.2 million new homes by 2029 in order to address the supply-demand imbalance that is at the root of Australia’s housing crisis.

However, annual build rates have fallen woefully short of this goal, with Australia approving less than 186,000 new homes in the 2024/25 financial year, falling 54,156 short of the 240,000 requisite target.

Despite these pledges to help first-home buyers, Labor Prime Minister Anthony Albanese has refused to say if he would like to see house prices fall – which would be the single biggest leg up for owner-occupiers.

“Look, historically in Australia … prices tend to rise,” he said in response to a grilling on the matter in April. “What we want to do is to make sure that people have accessibility for home ownership.”