Melbourne's housing slump may finally be working in its favour

Melbourne has become the surprise frontrunner in the national auction market, signalling renewed buyer confidence with its strongest clearance rate in months.

The Victorian capital recorded a preliminary auction clearance rate of 63 per cent with larger crowds at many auctions. The last time the preliminary clearance rate was higher was on February 28 when it hit 66 per cent.

This indicates a relatively balanced market between buyers and sellers.

By contrast, Sydney’s clearance rate stalled at only 49 per cent, Brisbane’s at 26 per cent, Adelaide’s at 51 per cent and Canberra at 44 per cent.

Dr Nicola Powell, chief residential economist at Domain, says buyer psychology differs in Melbourne due to the city’s long underperformance, creating better value perceptions.

She says Sydney has experienced strong price growth followed by a sharp downturn, leading buyers to expect further price falls and wait for better value.