A lot of emphasis is put on clearance rates each week – particularly in Melbourne and Sydney (the two main capitals of Auction sales), however few people really understand what the clearance rate represents. The broad assumption is that “sold at auction” equates to sold “under the hammer” and a high clearance rate means the market is “flying” while low clearance rates depict the opposite. However, it’s not quite so simple.

The clearance figure released on a Saturday afternoon factors in every property that has sold “under the hammer” and also sold via post-auction negotiation. The difference between the number of homes that sell out in the public arena and those that sell via negotiation always tends to fall in favour of the latter. In other words, in our experience, more homes sell via negotiation.

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It seems we’re in for a “spring of discontent”. The release of the long-awaited carbon tax details were intended to produce an element of certainty. It’s been spruiked as a simple effective plan ensuring pollution is reduced “at the lowest cost to the economy”, with a large spoon of sugar for us “ordinary folk” designed to sweeten the pain and lessen any complaints. The question is simply one of trust. As any good sales rep understands, you don’t sell the product, you sell trust. And let’s be honest – with questions and retaliations flying from the right and left, we’re doing little more than swimming against a tide of economic uncertainty.

There’s a good degree of wisdom behind the saying “seeing is believing”, because until the model has been tested, tax cuts granted, bank accounts debited and credited, no one is going to fully grasp the implications of this policy or believe the spruiked outcome. The economic model produced by Treasury already has a large question mark because there has been little, if any, consultation with companies in control of dictating price rises, and now we find the results were modelled on a $20 per ton estimate, not the $23 per ton reality. The truth is, no one really knows how much prices will rise – and more importantly, it seems the majority have little trust in those who sit at the controls.

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You can analyse as much statistical data as you like, and in many cases twist it to argue any point you want to make, but ask the average home buyer if he or she is finding it any easier to purchase property, and I doubt the answer would be an out-and-out yes.

Bear in mind a home buyer is not like an investor. Investors can pick and choose the areas they search in. They don’t have to warm to the “feel” of a home. They can be walking distance from any café, not their favoured one. They can purchase close to any good school, not the one their children attend. Investors don’t need to buy until a good opportunity presents itself, and for this reason they can step in and out of the market at will while targeting those “need to sell” vendors. In such cases, there are often multiple properties that tick the right boxes, and we’re currently in a perfect market atmosphere to take advantage of them.

However, home buyers rarely have such a luxury. When home buyers purchase property it often follows months of searching through limited suburbs of choice for a property with the particular idiosyncrasies to suit individual tastes. More often than not, when a home buyer finds a “dream home”, there are half a dozen other people who have targeted it as well and the vendor is less than willing to compromise.

Click here for the rest of the article (Property Observer Website)