Auction Clearance Rates are a great indicator of the strength or weakness of a property market and can be useful in predicting the future direction.
What are Auction Clearance Rates?
Auction Clearance Rates vary suburb to suburb and are the percentage of properties sold at auction over a period of time. Rates are typically delivered on a weekly basis and are calculated by dividing the total number of properties sold at auction by the number of properties listed for auction.
There are a number of factors that can impact clearance rates such as price expectations of the vendors, the number of bidders, interest rates, number of competing auctions on the day, and how freely banks are offering finance.
What do the rates mean?
Rates above 60 percent are considered high and show strong buyer demand, a growing property market, and a good market for sellers.
Rates below 60 percent, however, tell a different story. Anything below 60 percent shows weak buyer demand, a slowing property market, a possible oversupply of properties, and a market that favours buyers.
While clearance rates may seem cut and dry in regards to the story they tell – this is far from the truth. A small number of auctions is likely to show a high clearance rate, however, it is not indicative of a strong market due to the low number of properties available.
How else can I gauge the strength of the property market?
Other signs to look out for when gauging the strength of the property market include:
- The number of days houses sit on the market
- The number of new build properties in the area
- Supply and demand – are there more houses than buyers?
- Pricing history – how have prices changed over the past 10 years?
At the end of the day, it is best to look for advice from industry professionals such as real estate agents, lending specialists, and buyers agents.
