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This Week’s Property Market Highlights:

• The number of auctions surges to a six-week high.
• Get ready for clearance rates in Sydney and Melbourne below 70 percent.
• Home prices set new record highs this week in our largest capitals.
• Wage growth is shockingly low. Could a rate cut be around the corner?
• APRA may soon be taking aim at high-growth suburbs.

The Latest Preliminary Auction Activity

The number of sellers in the market increased, with auction volume rising from 1,857 last week to 2,011 this week.

The supply increase weighed down clearance rates. The nationwide preliminary clearance rate fell to 70.5 percent, one percentage point lower than last week’s preliminary result.

Don't be surprised if the final figure released tomorrow is lower than 70 percent. In fact, we may see the first week in over a year that both Sydney and Melbourne clearance rates fall into the 60s.

Here are all the capital city preliminary results for this week:

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Last Week’s Final Auction Results

Last week’s final results looked a lot like the week before. Only auctions in Melbourne and Canberra cleared above 70 percent.

Here are all the final capital city results for last week, followed by a breakdown of the sub-regions and key regional areas:

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Recent Changes in House Prices

Auction volume surged, but home prices rose. Both Sydney and Melbourne broke through to new highs. The median house price in Sydney increased 0.53 percent on the week and Melbourne was up 0.15 percent. Looking at the daily price changes, Sydney has only had one down day in the past two weeks.

Brisbane is the only city where home prices have fallen quarter-on-quarter, as you can see in the following chart.

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Market Analysis

Over previous weeks, as supply has risen, prices have declined. This week was different though - home prices in Sydney and Melbourne rose, even though auction volumes increased.

That can only mean one of two things: either demand increased at a greater rate than supply, or the increase in auction volume is not reflective of an increase in supply in the overall market.

Either way, demand remains strong, despite falling auction clearance rates and tougher lending standards for investors.

We did see a notable shift in momentum from Melbourne to Sydney. Auction clearance rates were similar but Sydney pulled ahead this week. Sydney home prices also rose at a greater pace than those in Melbourne.

This Week’s News

Wage Growth Remains Stagnant

The latest wage growth data from the ABS was not particularly encouraging. Wages grew by a disappointing 0.5 percent in the June quarter. That amounts to a record-low 1.9 percent for the year. It wouldn't be so bad if things weren't getting more expensive at the same time.

When wages grow at a slower pace than consumer prices, household budgets get squeezed. Consumer prince inflation remains low at about 2.2 percent. But with wage growth so low, discretionary spending is falling, which could have a far reaching impact in the economy.

It's rising housing costs which are really bringing some pain to Aussie families. Melbourne’s median house price has increased more than 1.9 percent in the last month alone and nearly 17 percent in the past year. Going back four years, home prices have increased about 80 percent while wages are up only about 10 percent over the same period.

Is Another Rate Cut Around the Corner?

The RBA's greatest focus will be to give a much-needed boost to wages, so I expect to see a cash rate cut in the next few months. But investors shouldn’t get too excited about the prospect of lower mortgage borrowing costs, at least not in Sydney and Melbourne.

APRA Getting New Post Code Powers

The word on the street is APRA, the banking industry regulator, now has new powers to focus its lending standards on post codes where home prices have been growing rapidly. That could mean either higher interest rates, tougher serviceability standards, or perhaps lower LVR requirements in our two largest capital cities. Those measures will be mainly focused on investors.

APRA's biggest job over the next few months and years will be to try to stop the flow of the RBA's cheap credit into the housing market. Good luck.

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Jason Staggers