What Do Sydney’s Current Auction Clearance Rates Mean?
If you’re a keen property market voyeur, you’ve no doubt seen the headlines about Sydney’s softening auction clearance rates.
We find out what it means for buyers and sellers in the eastern suburbs.
Sydney’s auction clearance rates are dropping, the headlines tell us. So, what’s really going on?
Sydney’s auction clearance rates – the numbers
According to Domain and CoreLogic, Sydney’s auction clearance rate for the week ending Saturday, 7 May, was 59%, one of the softest results since April 2020. Domain reports that the auction clearance rate has been hovering between 56% and 65% since 12 March. In contrast, at the same time last year, it was 81.4%.
There were also fewer auctions held last week, with only 654 compared to 914 the previous week and 1146 at the same time last year.
Why are auction clearance rates lower?
Last week’s results were the first to emerge following the RBA’s raising the official cash rate on Tuesday, 3 May, for the first time since 2010. Rising interest rates and inflation, and possibly the upcoming federal election, are leading to more caution amongst buyers. Meanwhile, with clearance rates softening, some vendors are opting not to sell at auction at all. Last week saw a quarter of homes withdrawn prior to auction for various reasons, the highest number in two years.
What about here in the eastern suburbs?
The Wednesday 4 May edition of the Wentworth Courier reports that the auction clearance rate in Sydney’s east was 80%. That figure includes properties that sold both at or prior to auction. CoreLogic’s figure for the Eastern Suburbs the week ending Saturday 2 May, meanwhile, was 51.4%.
In our experience, many vendors are choosing to accept an offer and sell their property prior to auction. Similarly, a lot of vendors are happy to negotiate after the property is passed in at auction, and these properties typically sell within a fortnight. So the percentage clearance results often don’t reveal the whole story.
What do auction rates tell us?
So, what should we make of these results? Firstly, it’s worth noting that auction clearance rates are just one indicator of the state of the property market. As we said, on their own they don’t tell the whole story, but they can give us an idea of buyer sentiment.
At first glance, the fact that auction clearance rates are dropping seems like a worrying sign for the market, especially as sustained low clearance rates can be associated with slow value growth. However, we need to step back and look at the bigger picture. Sydney’s property market experienced a record-breaking boom in 2020 and 2021. Price growth was through the roof, and auction clearance rates held above 80% for several consecutive weeks. But these were exceptional, rather than usual, market conditions. The boom has passed, and we’re now seeing the market normalise.
A clearance rate of 60%, like that we’re seeing now, is widely held to represent a balanced market. A clearance rate of 70% correlates approximately with 10% annual price growth, while clearance rates sitting under 60% over a period of time may indicate a buyer’s market.
What do current auction clearance rates mean for vendors and buyers?
The current auction conditions represent a golden opportunity for buyers. As PropTrack economist Paul Ryan points out, buyers can do well in times of uncertainty by being decisive when others are not. But it’s always a delicate balance between FOMO – or fear of missing out – and FOPO – or fear of paying over.
Meanwhile, both vendors and buyers will be interested to know that quality homes, in particular, are continuing to sell well under the hammer. Properties that tick buyers’ boxes and offer a strong emotional appeal – such as homes that are well-located, beautifully renovated, or in a popular school catchment – are still attracting fast and furious bidding wars at auction.
As the numbers from the Wentworth Courier show, homes in the eastern suburbs are selling well – just not always at auction. Although auction has long been a popular method of sale here in the eastern suburbs, it’s not the only way to sell a home. Different properties lend themselves to different sales methods. Our team, for example, sells almost half our properties off-market, well away from the competitive auction atmosphere. We also sell homes by private treaty and expressions of interest. It pays to remember that vendors always have the final say in how they’d like their property to be sold.
If you’re thinking of selling or buying in Sydney’s eastern suburbs, get in touch with my team today.