House Design

Here’s how I interpret auction clearance results

Written by The ReReport
As seen in the Source link, written by propertyupdate.com.au on 2020-07-01 14:30:00

Now that lockdown restrictions have been loosened more and more vendors are putting their property to auction.

In the good old days a Sunday wasn’t complete without checking the weekend clearance rates, especially for property pundits in Melbourne and Sydney.

That’s because the auction results are a timely gauge of conditions of what’s going on with the housing markets in our 2 big capital cities.

We report the weekly auction clearance results every weekend here at Property Update and it’s always the most read blog on a Sunday.

But how useful are these figures today considering we haven’t got the same level of auctions occurring as we had during the heady days of our property markets?

The good news is that there are now more properties being put to sale by auction than there were a months ago, revealing a significant improvement from the lockdown lows and in general the numbers of properties being put to auction are even a little higher than the same weekend of last year.

But despite the preliminary auction clearance rates being reported promptly every weekend, to get the right information from these figures it’s increasingly important to apply a few adjustments first.

Firstly the number of auctions being conducted are important.

Other that in Sydney and Melbourne, auction clearance rates do not give a good indication of the general sense of the local market.

There just aren’t enough numbers to make them statistically meaningful.

Then we also need to adjust for:-

1. Early results skew high

The various data providers collect their auction data in part by agent’s phoning in their results and partly through a team of tele-callers contacting agents.

Not surprisingly, agents tend to report their successful auctions results earlier.

Most data providers report preliminary results on Saturday night or Sunday and then release a final estimate on the following Thursday.

The difference in terms of clearance rates is on average around 3-5 percentage points in Sydney and Melbourne.

However, the weaker market over the last few months has seen more slippage than usual, and more properties being withdrawn from sale.

Pre-auction withdrawals provide another important clue to the strength (or weakness) of the markets.

Whereas a passed in result may be due to bidders not taking the price above reserve, a withdrawal points to sellers assessing that there will be insufficient bidders to even justify an auction.

Auction Totals

Shaneoliver Auction Results

2. Seasonality

The time of year also makes a difference to auction results. sold sale

Buyers and sellers come and go from the market at slightly different times, producing a regular ebb and flow to clearance rates as the balance of power shifts.

Hey seem to be more buyers around heading into Autumn and Spring, pushing up auction clearance results during normal market conditions – obviously this year things have changed due to the coronavirus lockdown.

For March this effect is worth about 2pts in Sydney, slightly more in Melbourne.

Seasonality diminishes gradually heading into Winter, re-emerges in Spring and then turns sharply negative as buyers disappear over the Summer holiday period.

Why bother tracking auction clearance results?

One of the main reasons for tracking auction clearance rates is they are a good “in time” indicator of the strength of our property markets and in the past have been a relatively good indicator of  price growth.

They are good indicator of prevailing supply and demand.

Generally speaking, clearance rates above 65% were typically associated with solid gains in property values, and over 75% with outright strength, while rates below 50% range were associated with property price declines.

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

Metropole

If you’re wondering what will happen to property in 2020–2021 you are not alone.

You can trust the team at Metropole to provide you with direction, guidance and results.

In challenging times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s what you exactly what you get from the multi award winning team at Metropole.

If you’re looking at buying your next home or investment property here’s 4 ways we can help you:

  1. Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now!  This will give you direction, results and more certainty. Click here to learn more
  2. Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property.  Click here to learn how we can help you.
  3. Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
  4. Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.

Leave a Comment