12.08.2020 Selling Advice

What Do Recent Auction Clearance Rates Tell Us?

What Do Recent Auction Clearance Rates Tell Us?

What do auction clearance rates really tell us about the property market and how did they fare over 2020?

Auction clearance rates are one of the key metrics for measuring the health and vitality of the property market.

We take a look at what buyers and sellers need to know about auction clearance rates, and what the auction clearance rates can tell us about the property market over 2020.

What are auction clearance rates?

The auction clearance rate compares the number of properties that sell at auction to the total number of auctions listed, or as Domain puts it:

Properties Sold at Auction / Total Number of Auctions = Auction Clearance Rate %

Auction clearance rates are usually issued weekly. The companies that compile these clearance rates rely on agents reporting the results of their auctions. The challenge is that some agents often don’t include auctions that are “withdrawn” or “passed in” or don’t sell for other reasons (these will bring down the overall rate) but they can include properties that sell before the auction and those negotiated directly afterwards.

For this reason, the companies who compile clearance rates usually issue “preliminary” results, then a week or so later adjust the data based on final sales numbers.

What can auction clearance rates show us?

Auction clearance rates are just one of many indicators of the state of the property market. The truth is they’re not always that relevant for every property market, particularly ones that generally sell more properties via private treaty and hold very few auctions. For instance, last weekend in Adelaide just 16 properties went under the hammer.

In Sydney’s eastern suburbs, however, auctions are the main way properties are bought and sold. So the auction clearance rate is actually a reasonable reflection of the health of the market. But even then they don’t tell the full story. For example, as a team, we sell close to 50% of our properties off-market and not at a competitive auction.

What’s a good auction clearance rate?

When Sydney’s auction clearance rate gets over 80% it’s generally considered a strong market and it usually indicates that it’s a seller’s market due to:

  • good demand from buyers
  • a low supply of properties compared to this demand, and
  • rising property prices as buyers adjust expectations and compete more aggressively to secure a home.

Anything below 60% in Sydney is generally considered a low auction clearance rate. Low auction clearance rates can indicate:

  • lower levels of buyer demand
  • a property market that is slowing down, with buyers waiting for a bargain and prices falling
  • a greater supply of properties, compared to buyer demand.

Auction clearance rates can be impacted by other economic measures, such as consumer confidence. They can also be impacted by vendors having unrealistic price expectations.

What did auction clearance rates do over 2020?

When the COVID-19 shutdown hit, all auctions had to be cancelled or moved online. This caused a dramatic fall in the clearance rate and we quickly adjusted to instead selling most properties by expressions of interest or private treaty.

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Auction volumes started to increase in June. Then by July, the Sydney clearance rate lifted back into the sixties.

Fast forward half a year, if we take a look at the week ending 1 November 2020, CoreLogic figures show that the Eastern Suburbs had an auction clearance rate of 73.6%, almost exactly the same as Sydney’s overall auction clearance rate of 73.1%, with 854 homes taken to auction.

It was the busiest auction week since early April and an increase in the clearance rate of 70.4% achieved the week prior. Comparing year-on-year, the same week in 2019 saw a very similar clearance rate of 74.6% from 843 auctions across the city.

Clearance rates now look to be slowly rising. For the week ending 28 November, Domain has the Sydney auction clearance rate sitting at 79%, which is again very similar to the 81% recorded the same time last year.

These levels show a healthy property market, with good buyer demand even in the face of the pandemic.

There’s no doubt that throughout the year, strong buyer demand and low stock levels have helped keep prices stable. There simply isn’t enough property to go around.

Preparing to buy or sell at auction in 2021?

If you’re thinking about selling in 2021, now could be the right time to speak to us about preparing to list your property and the sales strategy we would recommend for your property.

After all, we, along with many economists, expect next year will be a strong one for the Sydney property market.

If you’re thinking about buying in 2021, it’s the perfect time to ensure your finance is in place so you can hit the decks running, and you’ve registered with our team to find out about off-market sales as well.

If you are considering buying or selling in the eastern suburbs, don’t hesitate to get in touch with our team for advice on the local market today.