Auction clearance rate still strong, but report shows suburbs under debt stress

National auction clearance rates have dropped 5% last weekend to 72%, after spending the last four weeks of August between 75-77%.

According to Australian Property Monitors, in Sydney 71% of 200 properties cleared, at a median price of $653,500.

Adelaide followed, with a 74% clearance rate, and a median price of $487,500 for the19 properties at auction.

But Brisbane had a slower weekend, with just 39% of 18 properties changing hands, compared to 32.3% this time last year.

Victoria defied the trend, with a clearance rate of 85% showing “solid demand”, according to REIV CEO Enzo Raimondo. “It was the 17th weekend in a row with a result in excess of 80%”, says Raimondo.

Meanwhile, a report released by Dun & Bradstreet showed that a third of Australian suburbs are inhabited by residents at a “high” risk of defaulting on their credit obligations.

The Geographic Risk Indicator measured household “financial distress” by postcode – and found that 33% of Australian postcodes are inhabited by people who have previously defaulted on credit.

“Those suburbs categorised as a high risk are 340% more likely than average to include households that have experienced previous negative credit defaults,” CEO Christine Christian said.

“Consumer defaults are rarely one-off events. Any organisation that provides credit to consumers needs to be aware that despite signs of economic improvement, there are still further shocks to play out… This is particularly the case now as the effects of the Government’s stimulus package wear off.”

Victoria is the leader in “high risk” suburbs, the report said, with 46% of suburbs classified in this way. Frankston North is the states most at risk suburb, followed by Newport.

NSW follows at 36% (surprisingly, the up market suburbs of Bellevue Hills and Woollahra lead the pack), while 35% of West Australian suburbs are classed as high risk (led by Hamersly).

Fewer than 30% of South Australian and Queensland suburbs are classified in the same way. The Adelaide suburb of North Haven and Brisbane’s Acacia Ridge are rated as the riskiest suburbs.

But while wealthy and poorer suburbs were equally affected, metropolitan suburbs carry higher credit risk than rural ones, the report found.

In Melbourne, 62.5% of suburbs are classified as high risk, compared to 54% in Sydney and 50.2% in Perth.

Christian advised companies to check potential customers’ financial situations as closely as possible before taking them on.
“Not only do organisations need to keep a close eye on the financial positions of their current customers, they also need to very alert to potential troubles when they take on new clients.”