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The real mechanics behind the Auction Clearance Rate

November 30, 2017

In recent weeks the Sydney auction clearance rate has fallen to as low as 64%, a sharp and confronting drop from the 80% we experienced in the early months of 2017. This pull back in the number of sales under the hammer has caused concern among the key stakeholders who now believe the market has shifted. When analysing the state of the Sydney property market many media outlets, owners, agents and economists rely on this weekly record. However the auction clearance rate is not as important as it appears, it’s fluctuation should be interpreted with rose coloured glasses.

Firstly the REA and Domain clearance rates reported each week are not even close to being accurate. On Saturday the 4th November REA recorded a 65% clearance rate with 1,450 properties scheduled for auction, however of the 1,450 properties of only 1,002 results were reported. Domain on the other hand had only 952 properties listed for auction on the same day with only 537 outcomes confirmed at a 66% clearance rate.

What happened to the other 863 properties? And is it possible for the clearance rates of such differing samples to be so close?

If you look at the past four weeks there is a large disparity between the number of scheduled and reported results however a tight correlation between the percentage of properties sold.

REA Auction Data

Property ValueDeposit AmountDeposit PercentageEstimated LMI Cost
$400,000$20,0005%$11,897.45
$40,00010%$6,943.91
$60,00015%$3,770.13
$600,000$30,0005%$23,954.25
$60,00010%$13,284
$90,00015%$6,463.09
$800,000$40,0005%$31,939
$80,00010%$17,712
$120,00015%$8617.45

Domain Auction Data

Number of Dependant ChildrenTotal Gross Income Threshold
0$160,000
1$163,330
2$166,660
3$169,990
4$173,320
5 or more$176,650

If you step back and actually think about a statistic that covers such vast and varied geographical regions, price points and property types there is actually little to no relation or significance to the individual property profiles and their owners. The performance of a house in a specific region only bares weight when compared to other houses with comparable features in a similar price range in surrounding neighbourhoods. Using this data set as a point of reference is like Woolworths trying to determine the demand for oranges based the turnover of a store’s total inventory with only 7 of 10 registers recording results.

However the recording bodies are not entirely to blame for the incomplete data, in many cases a vendor may wish for a price to remain confidential. Unfortunately some agents also purposely hold results back from public record as they believe a poor sale price could tarnish their reputation. In some instances an agent will keep a price undisclosed in order to prevent their competitors from using the sales for their own promotional purposes. The most common reason for a result to remain unpublished is the lack of an efficient reporting tool for results. On the bustle of a busy Saturday, between open homes, auctions and private inspections an agent may miss the post auction call from Core Logic or Australian Property Monitors who track the results.

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