Under 50%: why Sydney and Melbourne auction clearance rates just hit a five-year low

G'day.

The July auction data landed over the weekend and it's the story every landlord group chat is arguing about. Cotality's preliminary combined-capitals clearance rate came in at 49.8% last week — up a whisker from 49.2% the week before, but still below the 50% waterline for the eighth consecutive week. That's the longest sub-50 streak since 2021.

Sydney and Melbourne are doing the heavy lifting on the downside. The ABC's Sunday piece framed it plainly: "fewer than half of all homes taken to auction found a buyer in the past week." And it's not one bad Saturday — it's a pattern that started with the May budget release and has now outlasted the CGT and negative gearing bill, the RBA's June hold, and the winter listings dip.

If you own an investment property, the temptation is to read this as either "sky is falling" or "media noise, ignore." Neither is quite right. Here's what's actually happening and what to do about it.

What the data says

• Combined capitals preliminary clearance rate: 49.8% for the week ending 5 July 2026 (Cotality). Final numbers usually revise down 2–4 points once withdrawn and unreported auctions clear.
• Sydney preliminary: 48.1% — the eighth straight week under 50, and the worst run since the 2022 rate-hike cycle.
• Melbourne preliminary: 46.7% — Cotality's data shows the lowest weekly clearance rate the city has posted in five years.
• Scheduled auction volumes are down roughly 12% week-on-week in Sydney and 8% in Melbourne. Sellers are voting with their feet: fewer listings, and more are being pulled or switched to private treaty before auction day.
• Withdrawal rates are running above 10% in both cities — historically that number sits closer to 5–6%.

For context: a "healthy" clearance rate is 65–70%. Anything under 55% is usually associated with flat or falling price growth in the following quarter. Under 50% for two months running is the market telling you buyers and sellers can't agree on what the property is worth.

Why now

Three things are stacking, in roughly this order:

1. The May federal budget flagged the CGT and negative gearing changes that ultimately passed in late June. Investor buyer inquiry fell almost immediately (Domain and REA both reported 20%+ drops in investor searches through May–June).
2. Lender serviceability cuts — the changes we covered last week — reduced how much investor bidders can actually pay, even the ones still interested. Some are turning up to auctions with 10–18% less borrowing capacity than they had in April.
3. The Cotality Home Value Index posted a national 0.4% monthly fall in June — the sharpest monthly drop since December 2022. Sellers who anchored their reserve to April comparable sales are now above where the market will meet them.

Alan Kohler's widely-shared "property is now a bad investment" column on 30 June didn't help sentiment either. It's overstated — property is not suddenly a bad asset — but it captures the mood, and mood moves auction rooms.

How sellers are responding (and where the risk sits)

The news.com.au piece from this morning documents an uncomfortable trend: Melbourne sellers accepting pre-auction offers well below reserve just to avoid a passed-in campaign. Agents are also increasingly running "if not sold prior" clauses — where a below-reserve offer converts the auction into a private sale before Saturday.

For landlords thinking of selling, that's a genuine risk to be aware of:

• Accepting a nervy pre-auction offer at 92–95% of your reserve may still beat a passed-in campaign in this market — but only if the alternative genuinely is a pass-in, not a slow but successful auction.
• The buyer pool is shallower but not empty. Owner-occupier demand is holding up (first-home buyer inquiry is actually up year-on-year post-budget, since the reforms didn't touch owner-occupier tax treatment). Well-priced family homes near schools are still clearing.
• Investor-grade stock — small units, outer-ring townhouses, dual-key setups — is bearing the brunt of the clearance drop. If that's what you own, price expectations need a genuine reset.

What this means if you're holding

Most self-managing landlords aren't selling this quarter. For you, the signal is more useful than the number:

• Refinancing windows just widened. Falling clearance rates and a soft June HVI print push rate-cut expectations forward. The market is now pricing a ~60% chance of an August RBA cut (up from ~35% a month ago). Talk to your broker about pricing options that let you capture that if it lands.
• Rent growth is still positive. SQM's July rental index has rents up 4.1% year-on-year nationally, even as prices dip. Rental yields are actually improving — mechanically, that's good for your cashflow position even if capital values are flat.
• Insurance and valuations may lag. If your lender orders a revaluation this quarter (some are, as part of the serviceability changes), don't be surprised by a slightly lower number than you'd have got in March. That only matters if you're refinancing or releasing equity — otherwise ignore it.

What this means if you're listing

• Don't anchor to April comparables. Look at what's actually settling in the last four weeks in your suburb, not what was listed at.
• Consider private treaty over auction if your property is investor-grade in a slow suburb. A passed-in auction is a public "the market rejected this" signal that can drag your eventual sale price down further.
• If you go to auction, get your reserve reviewed the Thursday before. Agents are seeing sharp week-to-week swings in buyer numbers — the reserve you set three weeks ago at listing may no longer reflect Saturday's room.
• Have a private-sale plan B ready. If your agent recommends accepting a solid pre-auction offer, don't reject it reflexively — but do run the numbers against a realistic passed-in scenario, not a fantasy auction result.

The bigger picture

Clearance rates under 50% don't mean a crash. Sydney's rate was under 50% for most of 2022 and prices ended that year down about 12%, then recovered inside 18 months. What the current data does tell you is that the 2023–early-2026 conditions are over. Buyers now have leverage. Sellers need to be either patient or realistic.

For landlords, the highest-value moves this quarter are the boring ones: get your lease renewals sorted, keep your bond and inspection paperwork tight, review your loan structure, and don't make big portfolio decisions on the back of one weekend's clearance headline.

We'll cover the Cotality July HVI print here as soon as it lands (usually first business day of August). If the June 0.4% fall repeats — or accelerates — the RBA conversation gets very interesting, very fast.

Cheers, Tob

Sources

• Cotality weekly preliminary auction clearance report, week ending 5 July 2026
• ABC News, "Sydney and Melbourne record worst property auction clearance results in years", 28 June 2026
• ABC News, "Melbourne auction clearance rates reflect investor exodus", 4 July 2026
• news.com.au, "Sydney sellers shrink from auctions amid falling market", 6 July 2026
• news.com.au, "Melbourne auction slump sparks desperate sellers to take risky bids", 6 July 2026
• Cotality Home Value Index, June 2026 release (1 July 2026)
• SQM Research national rental index, July 2026