Auction Clearance Rates – Did Sydney’s property market really slow down at the end of 2014?

If you believe what you read in the media it did.  If you take notice of auction clearance rates you will certainly think it did and if you listen to some selling agents it did (and certainly some suburbs seemed to slow compared to others).

The thing is, statistics are useful in many instances BUT we really need to look beyond the numbers if we want to understand what is going on in the property market.

Last wesydney_property_buyers_whattoexpectin2015ek in Dr Andrew Wilson’s column in the Domain there was much mention of falling auction clearance rates.  Auction clearance rates drop most years in the spring months and December because of simple economics. More property is listed for sale, so the balance between supply and demand is skewed more in the buyers’ favour. Which, in turn means that there is less competition per property and an increase in the amount passed in at auction.

Let’s dig further. The column compares figures for the last weekend in November against the same weekend last year. The clearance rate for this year was 74.6% and last year it was 80.4%. No surprise there, since the number of properties listed for auction this year were 1058 against last year’s comparison weekend’s much smaller amount of 874. But here is where it gets really interesting. This year 521 properties were sold under auction conditions as opposed to 410 in the same weekend last year.

Is it really a slower market when MORE property actually changed hands?

Now let’s look at the percentage of properties withdrawn from auction. Agents usually withdraw properties when there is no interest and no hope of a sale at the auction (or if the vendor has crazy price expectations). In the weekend reviewed for this year the percentage of properties withdrawn from auction was 0.47%. In last year’s comparison weekend the percentage of properties withdrawn was less, at 0.3%. So you could argue that this is reflective of a slow down.

However, if the market can sustain clearance rates above 70% in the face of record numbers of listings, how can we call this a softening?

I would suggest that the only way auction clearance rates are a reliable indicator is if you compare them when the number of properties listed for auction are similar. And it appears that our our expectations have been  before this latest boom it was widely regarded amongst my peers that clearance rates over 70% represented a hot market anyway!

So, what can we expect for 2015?

Well, it’s our view that a shortage of new listings over the Xmas holiday period will result in quite a bit of pent up demand. In January, we expect to see all left-over stock from 2014 get snapped up by new buyers entering the market. In February we anticipate strong buyer competition and an increase in the auction clearance rate. This situation could well continue right until the start of next spring, as Easter and winter bring cause for potential vendors to delay listing their properties for sale. And then there is talk of another interest rate drop, which could further fuel the fire. Unless something big happens in the domestic or world economy, we expect business as usual next year – another challenging one for property buyers as prices continue to rise.

 

Please note:
Good Deeds buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.

 

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