Auction Clearence Rate (ACL): Don’t get caught out

Bishwas Bhattarai, Senior Lending Manager
M. Comm. (Banking & Finance) UNSW, Dip. Fin. Plan.

12th Feburary 2018

Auction clearance are long been used as a barometer to highlight buyer confidence but don’t caught on it. There is a lot to equation than just numbers


Market Wrap: 12 Feburary 2018

Auction result seems to be crawling back, to “normal” in most capital cities as per REA (Real and Domain. Domain recorded the Sydney clearance uplift of 69.7 percent from 290 reported properties compared to previous week’s 50.6 percent from 142 properties that got sold. However, total registered bidder in each property is lower single digit implying lower confidence in market. Auction clearance are long been used as a barometer to highlight buyer confidence but don’t caught on it. There is a lot to equation than just numbers.

As per domain auction clearance rate for Sydney is 69.7% from 460 total properties that were planned to go under hammer last Saturday. Melbourne with 72% from 541, Brisbane with 60% of 93, Adelaide with 67% of 49, and Canberra with 65% for 60 scheduled auctions. Anything over 60% is still a very good market, hovering on this mark shows the demand is still high. However, the number of properties going under the hammer is way too low to make any judgement call.

There is no surprise after the school holidays, most are returning back to normal working life brick and mortar investment are no different. Stocks on the market are increasing so are the number of buyers and open houses.

Sydney market has been slow last quarter. During this time Sydney has recorded 2.7% fall in median house price. Agents are reporting market is slowly turning and lot so buyers are coming in to gauge the market. First home buyers are in force and most sought out suburbs are in look out. Last Saturday Dee Why hosted 9 auctions, followed by Newton Castle Hill, Chester Hill and Alexandria all recording 5 each. Due to the entry level price tag, close proximity most of the unit are very appealing to first home buyers in Dee Why. Likewise, any suburbs that are primarily into first home buyer’s wish list are getting and likely to get more traction. Fringe first home buyer’s suburbs like Auburn, Granville, and Liverpool that has seen so much growth in the last 24 months on the back on neighbouring suburbs are feeling the pain.

Steller performer: the house at 57 John Street, Petersham performed against the odds with just 7 bidders settling for $2 567 000 above $367 000 the price guide.

Sydney is still demand driven, since regulators have placed speed hump on investor market first home buyers are making way back in market. Sydney has been resilient despite the fact most pundits are expecting property price to fall between 5-10% in 2018. Last week auction results have provided few sparks as most commentators are calling the market has rebounded.

It is too early to call on the back on a week’s data. Total number of scheduled auction of 460 is too low compared to the glory days of 1400-1700 scheduled auctions. And most importantly, those making under the hammer are very exclusive, handpicked and immaculately selected houses which would have easily been sold even in the modest market. Average and low level properties will just be available for private treaty only. So reliance on Auction clearance rate only would not be sufficient to gauge the property market. Just by visiting an open house could tell a lot of demand about the suburbs.

Melbourne has been fortunate to enjoy the clearance rate of over 60% mostly. Due to lower median price than Sydney and better living condition demand for brick and mortar has been very robust. Plus, Australia’s second largest city has been beneficial of interstate migration and net population growth. Mulgrave, Point Cook and Brunswick have consistent performed with all over 7 scheduled auctions last Saturday.

More first home buyers are likely to come out of woodwork in coming days, so will supply of stock. Buyers will have more choice in the market, more opportunity to negotiate and time to decide. Suburbs, with good community, school and infrastructure are top on wish list for most buyers. On the back of last week ACL most agents will be using this as case to get first home buyer to sign the dotted line. Don’t get caught out on ACL know the market, research; negotiate as time is in buyers hand. Also, if you are seeking to purchase specific property ensure to visit the other properties in the same and surrounding suburbs that spell a lot about demand.