September best month for auction on record

There seems no end in sight to Sydney's property boom with last weekends 86% auction clearance rate making September the strongest month on record.

According to the Fairfax-owned Australian Property Monitors, Septembers average for Auction clearances is now at 85.1%, buoyed but low interest rates and rising confidence.

According to APM's senior economist Dr Andrew Wilson there's no doubt we're in a boom auction market. "The previous strong period was in the autumn of 2002 and that was also our strongest period for prices growth," he says.

But Dr Wilson is skeptical about there being a price boom imminent. He says that low profit growth, low wages and rising unemployment, is likely to keep a lid on prices but anticipates a 10% median price growth for Sydney in 2013.

"There are now some encouraging signs at the top end of the market," he says, "and that's all about confidence."

The most expensive auction sale recorded by APM on Saturday was $3.87 million for a seven-bedroom Victorian residence on a 2844 sq m block at 162-164 Albert Road, Strathfield. The Sydney property sold for more than $300,000 over the reserve price.

The head of SQM Research, Louis Christopher, is predicting price growth of 15-20% for Sydney next year.

"Such a rise will create a large dilemma for the RBA, especially if the national economy is still running below average growth."

AMP chief economist Shane Oliver agrees the booming auction market - particularly with the rising dollar - does put the RBA between a rock and a hard place due to weakness in other parts of the economy. "Eighty per cent-plus clearance rates are not necessarily signs of a bubble in Sydney, but the risks are certainly pointing in that direction and the RBA will be wary of throwing further fuel on the fire." He expects the Reserve Bank to leave rates on hold when it meets next week.

Despite the general positivity in the market, lenders and home buyers being encouraged to take a long term view. Lenders are increasing "loan buffers" used to calculate borrowers ability to service the home loan when rates begin to climb.

To arrest some of the uncertainty, home buyers may soon be looking to fix their rates. With a range of standout fixed rate home loan products in the market a fixed rate may be a beneficial way to lock in those savings.