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* Auction volumes rise above 2,000 for the first time this year
* Auction clearance rate above 50 pct for second week in a row
* Early days but promising sign for the cooling market - analyst
By Swati Pandey
SYDNEY, Feb 25 (Reuters) - A palatial 5-bedroom estate in a wealthy harbourside Sydney suburb sold for A$4.1 million ($3 million) last week as auction activity picked up across Australia and price falls slowed, a bright sign for the country's cooling housing market.
Multi-million dollar properties in Melbourne, Canberra and Perth too found buyers with auction volumes soaring to 2,303 across Australian capital cities, the most since the start of the year, data from property consultant CoreLogic showed on Monday.
Encouragingly, the clearance rate held above 50 percent for a second week in a row compared with rates at or below 42 percent for five consecutive weeks in November-December 2018.
"Early days still, but it's a welcome sign," said Craig James, chief economist at CommSec. "Housing affordability certainly has improved, people are also more confident about their jobs specially in Sydney and Melbourne," he added.
"Certainly, the fundamentals are strong with low unemployment and interest rates."
The data will be welcomed by policymakers who are hoping for an "orderly" correction in the country's once-booming housing market where prices broadly doubled over the five years to late 2017. coming weeks will be critical to assess whether clearance rates hold up as auction volumes revive.
Monday's data showed home prices slipped 0.1 percent in Sydney last week, the slowest weekly decline this year so far. In addition, Australia's biggest city was host to 795 auctions with preliminary results showing a 58.6 percent clearance rate, up from 54.6 percent the week before.
While the data is promising overall, activity is still subdued compared with the same period a year ago when 1,259 homes were taken to auction returning a clearance rate of 65.1 percent, the data showed.
Top officials at the Reserve Bank of Australia (RBA) say the current downturn is "unusual" with Sydney home prices off an annual 10 percent at a time of record-low interest rates and falling jobless rate.
Still, many analysts predict steeper falls in property prices on fears of a supply glut and easing demand. A slowing housing market is also a major headwind for Australia's A$1.8 trillion economy which is in its 27th year of recession-free expansion.
Independent economist Lindsay David expects home prices in Sydney and Melbourne - Australia's two biggest cities - to fall between 15 and 20 percent in 2019 alone. This will hit housing investments, leading to job losses in the construction sector and a further slowdown in consumer spending, he noted.
Westpac economist Bill Evans and UBS economist George Tharenou also expect a deeper property downturn and are calling for two cuts in the official cash rate in the next 6-12 months to further record lows of 1.00 percent.
"The fall in dwelling investment and a rising savings ratio could potentially tip the economy into recession later this year or early next year," David noted in a report titled "Let the Bloodbath Begin." ($1 = 1.3990 Australian dollars)
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