Melbourne auctions hold firm after rate rise as CGT debate rattles investors, with PropTrack showing a 65 per cent preliminary clearance rate.
Melbourne buyers have barely blinked after the rate rise, but fresh capital gains tax debate is rattling investors as auctions hold firm.
While activity on the ground has remained resilient heading into February, experts warn the combined pressure of shrinking borrowing power and renewed tax uncertainty is reshaping behaviour across the market.
Baseline Financial director Ari Levinson said the latest rate rise had already reduced borrowing capacity for typical Melbourne households, tightening competition even when buyer demand still looked strong.
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Borrowing power generally falls by about 2.3 per cent to 2.5 per cent for every 0.25 percentage point increase in interest rates, he said.
For a Melbourne couple earning a combined $180,000 a year and previously able to borrow about $925,000, that equated to roughly $21,000 to $23,000 being shaved off capacity, reducing it to about $902,000 to $904,000.
“That may not feel dramatic in isolation, but it can be the difference between competing confidently and missing out,” Mr Levinson said.
Baseline Financial director Ari Levinson says rising rates are tightening borrowing power for Melbourne buyers heading into February.
What the rate rise has already cost buyers: Baseline Financial data shows a typical Melbourne couple’s borrowing power falling from $925,000 to about $902,000-$904,000.
He warned further rises could compound pressure on household budgets, pushing more buyers towards mortgage stress, commonly defined as repayments exceeding 30 per cent to 35 per cent of gross household income.
Mr Levinson said buyers planning to bid in the coming weeks should check their borrowing limits early, avoid taking on new credit, and speak to brokers before auction, noting that even small changes to debt levels or interest rates could materially affect approvals.
The double whammy of higher interest rates and renewed CGT debate is sharpening pressure for buyers, investors and renters across Melbourne.
Prominent buyer’s advocate Cate Bakos said buyers had largely priced in the rate move, with little evidence of hesitation at inspections or auctions.
“Interestingly, I haven’t seen anyone step back,” Ms Bakos said.
“Buyer enquiry has flowed almost seamlessly from last year, and even after the rate announcement there was no noticeable slowdown.”
Buyer’s advocate and PIPA chair Cate Bakos says Melbourne buyers have largely priced in the rate rise, with auction competition remaining steady.
Ms Bakos said CGT uncertainty mattered primarily to investors and prospective investors, but the consequences could spill into the rental market if more landlords exited.
“That’s the paradox,” she said.
“Disincentivising investors risks removing rental stock when we don’t have enough homes to house renters.”
Alba director Thomas Mifsud says investors are weighing CGT uncertainty as part of broader portfolio decisions over the next 12 to 18 months.
Alba director Thomas Mifsud said investors typically responded to policy uncertainty in stages rather than rushing to sell.
“The first response is reactionary — people pick up the phone and ask, ‘How does this affect me?’” Mr Mifsud said.
“Once the emotion settles, it becomes a portfolio question.”
He said most existing investors were unlikely to sell immediately, but many would reassess strategy over the next 12 to 18 months, depending on how markets and policy settings evolved.
“Existing owners generally keep holding as long as they can,” Mr Mifsud said.
“It’s the people sitting on the sidelines trying to get in who feel it most.”
33 Stephens St, Balwyn North sold for $3.135m as Melbourne auctions held firm despite the latest rate rise.
6 Bayles Crt, Donvale sold for $2.003m, underscoring continued demand for quality family homes at Melbourne auctions.
Melbourne’s auction market showed little sign of buckling, with PropTrack figures showing a preliminary clearance rate of 65 per cent from 353 reported results, with 230 homes selling.
Several strong results at the upper end pointed to continued depth of demand for quality homes, including a $3.135m sale in Balwyn North and a $2.003m result in Donvale, while near-$1.8m outcomes in Box Hill North and Mentone also underlined buyer appetite.
35 Ashley St, Box Hill North sold for $1.79m as buyers stayed active following the RBA rate rise.
113 Whitby St, Brunswick West sold for $1.69m as inner-city demand held firm at Melbourne auctions.
Inner-city demand held firm, with a Brunswick West home selling for $1.69m.
Agents said some buyers remained cautious around price ceilings, but competition for A-grade homes was resilient, suggesting most bidders had already factored higher borrowing costs into expectations before stepping up to bid.
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