Plunging auction rates point to house price falls: Market reacts to rates, cost of living and Middle East war

Buyers shunned real estate auctions during the traditional bumper weekend before Easter as worries about soaring borrowing costs, rising energy prices, and the Middle East war dented confidence.

Auction clearance rates in Sydney sunk to just 55 per cent on the weekend, versus a March average of 67 per cent. In Melbourne, they hit 59 per cent, versus a March average of 65 per cent, Domain data showed.

This was despite super Saturday, the week before the Easter long weekend, traditionally being a bumper selling season.

“I think we’ll probably see prices falling in Sydney and Melbourne when we get some data on Wednesday and I think we’ll see a slowdown in price growth in the other capital cities,” said Cameron Kusher, the founder of property consultancy Kusher Consulting.

“In Sydney and Melbourne there’s lots of stock for sale and people are confronted with inflation every time they fill up petrol. It’s clear the longer the Middle East conflict goes the more likely interest rates go higher, so that’s thinning out buyers and people are more cautious about taking on debt.”

Mr Kusher added that five years of strong price growth in other capital cities including Perth, Brisbane, Hobart and Adelaide could also slow and eventually reverse over the rest of the year if the Middle East conflict does not end within months.

Starr Partners chief executive Doug Driscoll, who sells property in Western Sydney and the NSW Central Coast, said the weaker auction clearances rates were a sign that buyers were waiting nervously.

“There definitely has to be some credence or correlation between falling auction clearance rates and the state of the market or the state of consumer sentiment,” he told The Nightly.

“Undeniably, with rising inflation, increasing interest rates, the uncertainty in the Middle East, we’re already kind of enveloped by a cost-of-living crisis as it is.

“Typically, in times of uncertainty, what people will do is they’ll kind of sit on their hands.”

Canberra’s weekend auction clearance rate fell to just 42 per cent with Stu Hamill, the partner of The Agency real estate group, warning of prospective buyers and sellers being turned off by the prospect of rising Reserve Bank interest rates.

“As the uncertainty grows, the quality of stock won’t be available because people who are downsizing will probably have more hesitancy,” he said.

More interest rate increases forecast

Interest rate traders still expect the Reserve Bank to raise interest rates by 75 basis points in 2026 to take the cash rate from 4.1 per cent to nearly 4.85 per cent in a bid to battle inflation, which Westpac Bank forecasts will reach 5.5 per cent in the second quarter of 2026.

Sydney’s clearance rate equalled its lowest since July 2022, the last time house prices dipped amid rapid interest rate increases by the Reserve Bank. Melbourne’s clearance rate equalled its weakest since April, 2025, as buyers battle rising living costs linked to soaring energy prices from the supply shortfalls from the Middle East.

“Looks headed for price falls,” AMP chief economist Shane Oliver said on the weekend. “Clearances are continuing to fall with more rate hikes likely and the war depressing buyer confidence and pushing up listings. Withdrawals are also up.”

Economists are divided as to how high the RBA will take interest rates this cycle as it treads a fine line between containing inflation and avoiding tipping the economy into a deep recession.

“This (Middle East oil blockade) is a significant shock to the economy and a challenging situation for public policy,” said Westpac’s Luci Ellis.

“For the next few weeks, though, the appropriate monetary policy response is ‘wait and see’. The current crisis is not (yet) a financial crisis or a pandemic requiring immediate, potentially out-of-cycle, action. And conditions could be quite different in a month’s time. “

Cotality data for national property prices in March is due on April 1.