Auction Clearance Rates

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Auction clearance rates are now offered to us by REIV, APM and RP Data. They are all different as they have a different collection method. They are from different sample sizes, different properties and will just about always be different results. However, the exact number is not what is important. It is the movement, or in this case, non-movement of the rate in the last 6 Weeks.

Auction clearance rates drive market sentiment. And market sentiment drives price growth, or not, in the market. Since 17th February this year the REIV auction rates in Melbourne have been above 70%. Sydney has been similarly high. These figures are very similar to 2009. (2010 over a similar timeframe had average clearance rates above 80%).

Market sentiment is not only influenced by auction clearance rates. Consumer confidence, unemployment figures, stability in government and the overall economy play their roles as well. But the clearance rate, in my opinion, is the single greatest impetus for those who are considering, not if they should sell but when they should sell. And at the moment, there seems to be no runaway results like 2010, where the market imploded, there are fewer overall sales than any of the past 5 years. And, if I am reading the commentary correctly, the bias for interest rates has begun to swing in an upward position, indicating that the possibility of a rate move in the future, may be up not down, albeit a little way off.

Let us cut to the chase! There are always plenty of people looking to sell and waiting for “the right time”. Selling agents will always say, “it is the right time now!” However, I think their message will hit home. Investors are getting better results in property than both the share markets and banks. Homebuyers have been saving like crazy since the message from the GFC was “SAVE, SAVE, SAVE” and borrowing money is as cheap as it is likely to be for some time in the future.

If there are that many people wanting to get into the market, and there are only limited properties on the market, then there is only one way prices can go. UP, UP, UP! If you are considering selling any time this year, now is probably as good as it will get. I think we will see a marked improvement in stock levels of good property by May.

As a buyer’s advocate, I see the market having steady price increases over the next few months. The winter hiatus will probably be later this year, probably June or July rather than May. Unless there is “an event” (GFC or 9/11), I think we will see a good supply of quality stock come onto the market over the next 2-3 months. A steady, level increase in price should be sustained through to the winter slow down and then later this year there will most likely be a flurry of activity in the final 10 weeks of October, November and early December giving us a standard 8-9% rise of median prices throughout this year.

This would mean the most difficult thing for a buyer this year will be getting the value right. Knowing how much to offer or when to stop bidding at an auction becomes crucial in negotiations and auction bidding. If you do not push a little harder than normal, you may find yourself out priced in the market place within a few months. If you bid like there is no tomorrow, you may find yourself losing the first 2 years capital growth.

If you are considering the purchase of a property this year and you would like some help, please feel free to give us a call.

Ian James
JPP Buyer Advocates

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About the author

Ian has been operating his own businesses for more than 25 years. During this time the self taught lessons of building the business, dealing with staff, suppliers, clients and economic woes have been invaluable. Ian is a fully licensed Real estate Agent, a member of the REIV and registered with the Business Licensing Authority.

Buying property is not just sticking up your hand and outbidding your rival. It is an emotional, fiscal and psychological decision that needs to be planned and well executed. Ian is usually involved in over three hundred property negotiations per year; ranging from the $250,000 first unit purchase for a young couple to multiple million dollar residential developments. Ian's business background and endless numbers of negotiations make him one of the industry's leading negotiators.

Ian is married with two adult children, living in Patterson Lakes. He is a keen fisherman when weather and business allows the time.