Auction clearance rates are the most viewed property statistic. In this market insight, we take the opportunity to help explain what they are and how to understand them.
They are calculated for auctions scheduled during the week, ending each Sunday. It indicates the percentage of properties sold at auction using available data. The data also takes into consideration properties sold before & after auctions and includes passed in and withdrawn auctions.
How to calculate auction clearance rates
Most auctions are transacted on Saturdays, so clearance rates are published on Sundays. There can be situations where the data isn’t available on a timely basis. Auction clearance rates can include the following:
- Property sold at auction
- Property sold before and/or after auction
- Withdrawn properties at auctions (also known as a property being passed in)
Withdrawn properties are recorded as a no-sale. This will lower the clearance rates, but in many cases properties passed in at auction are sold days or a week after. Some vendors and buyers can continue negotiations for sometime before closing an agreement.
They are a good guide for buyers and sellers
Auction clearance rates are the easiest and most accessible statistics available. They are a great guide to identify the level of buying activity in the market. If there are more properties for sale in comparison to buyers, the auction clearance rate is more likely to fall. On other hand, if there are more buyers than available properties for sale then the auction clearance rate will increase. A high clearance rate generally indicates a growing property market while a low clearance rate may indicate a slowing property market.
High clearance rates
High clearance rates are generally influenced by the following:
- Strong buyer demand
- Low supply of properties to buy
- Growing property market
- The property market is hot for sellers
Low clearance rates
Low clearance rates are generally influenced by the following:
- Lower buyer demand
- Over supply of available properties to buy
- Slowing property market
- The property market is hot for buyers
There can also be many ad-hoc circumstances where auction clearance rates can change. One in particular that has come to the public’s attention is a health pandemic. There has been a low supply of available properties, which has increased clearance rates, but as face-to-face auctions were put on hold for months, they were limited to online auctions. Though this helped many buyers and sellers in such difficult times, an economical or political change can also cause auction clearance rates to significantly fall.
If you look at the graph (above), you’ll see that the auction clearance rates have trended over the last 13 years. The global financial crises in 2007-2009, shows how economical circumstances can impact on both supply and demand. However you can see how it quickly responded in 2010.
Another example is 2020. The global health pandemic has caused the auction clearance rates to sharply fall. Will we see a rebound in 2021?
Looking at normal property conditions, the clearance rates often reach a high rate during the warmer seasons of Spring and Summer. While they are often lower in the winter when it can be unpleasant to shop in the cold and rain. Spring would be most notably the most successful time to sell a property as many buyers may have achieved some consistent savings during the course of the year. The summer season can be a good time to sell, but normally near Christmas, many buyers are focused on spending time with family and friends.
There are many factors that directly impact auction clearance rates:
Here are a general list of factors:
- The number of properties listed for auction
- Price expectation of the vendors
- The number of bidders at the auction
- The number of actual bids placed
- Seasonality
- Interest rates
- The availability of credit
- The specific suburb (some have a higher reliance on auctions)
- The number of competing auctions in the surrounding area (at the same time)
Auction clearance rates are a good guide, but they should not be the sole statistic when buying or selling property. Not all property types and location are equal. They will perform different at all intervals.
If you’re interested in buying a property we welcome the opportunity to help. You can contact us at anytime to discuss your objectives. We can assist you further. We specialise in brand new and off the plan properties.
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more, please contact us. We welcome the opportunity to assist you.
December 2020
