December has seen the biggest-ever week of auctions recorded, but the clearance rate appears to have fallen. So, what does this mean for buyers and sellers in today’s market? Attwood Marshall Lawyers Property Lawyer, Raphaelle Worrall, discusses the impact auction clearance rates could have on the market heading in to 2022.
For the week ending Saturday 11th December, 4,970 auctions took place nationally – a significant increase on the previous week’s 4,153 and the highest number of auctions recorded in any one week since CoreLogic began tracking auctions in 2008. This record-breaking milestone is almost twice that of the auction rates seen the same week in 2020, when 2,580 homes went to auction. It seems this has pushed the market to its limit and cut the preliminary clearance rate to 66.6 per cent.
On 11th December, Sydney experienced a 62.7 per cent preliminary auction clearance rate which is a far cry from the clearance rates of 80 per cent seen throughout the Autumn and Winter seasons. A national clearance rate of 66.6 per cent is the lowest preliminary clearance rate we have seen since late August 2021. This time last year, 71.1 per cent of reported auctions were successful.
Across Melbourne, 2,309 homes went under the hammer between 6th to 11th December, overtaking the week of March 25, 2018 (when 2,071 homes were sold). Melbourne recorded another drop in its preliminary clearance rate, with 65.3 per cent of the results collected so far returning a successful result, down from 69.4 per cent the week before.
Sydney also recorded its busiest week since CoreLogic records in 2008 began, with 1,797 homes taken to auction across the city.
With auction clearance rates falling, will prices do the same?
Auction clearance rate is the percentage of properties sold at auction on a particular week or month.
Historically, most clearance rate data is collected on Saturday each week to facilitate auction results being published each Sunday. Reported clearance rate values can differ if data is delayed or properties were withdrawn from sale yet counted in the original data. Auction clearance rates may include both the sold at auction results and those sold directly before or after an auction has taken place. Withdrawn auctions (passed in) are also collected and included in the data but are classified as ‘no sale’.
The clearance rate of properties at auction can be a good guide to establish the number of buyers or sellers in the market. If there are more properties for sale than there are buyers to purchase them, the clearance rate will generally fall. If there are many buyers and only a few properties for sale, then the clearance rate may be high. A high clearance rate generally indicates a growing property market, strong buyer demand, and potentially under-supply of available properties. A low clearance rate may indicate that the property market is slowing down, and the market is moving in the favour of buyers.
In a post-lockdown world, more homes were listed for sale and the number of auctions scheduled reached record highs. But as borders reopen and we learn to adapt to the new way of life, it seems potential property buyers may be turning their focus away from real estate whilst they enjoy the festive season. It is expected that for the house hunters who have not yet secured their dream home, the hunt will continue in the new year and demand may increase once more.
An auction clearance rate of 70 per cent usually correlates with price growth of about 10 per cent, while a 60 per cent clearance rate is considered a balanced market. If it dips below 60 per cent, house prices are likely to fall.
Auction clearance rates are a good market indicator for the direction of a property market, but it is equally important to remember that private treaty remains the most common method of sale. Clearance rates may also vary dramatically by suburb and state given the many factors that directly impact auction clearance rates, including:
- 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 on auction day
- Interest rates
- The availability of credit
- The specific suburb (some suburbs have a higher reliance on selling by auction)
- The number of competing auctions in the surrounding area (at the same time)
In summary, the clearance rate percentage can be useful when predicting the direction of the property market and should be considered as a general indicator of strength or weakness in the market.
Queensland property market update
It’s clear that listing volumes are now playing catch-up after a lockdown-driven lull, however the jump in new listings isn’t exclusive to the states that experienced lengthy lockdowns, such as New South Wales and Victoria.
This would seem to suggest that the easing of COVID restrictions and high vaccination rates are leading to improved vendor confidence, with more buyers searching for their next property. Vendors have been able to hold firm on their price expectations, with discounting across the capital cities being just -2.8% in the three months leading up to November 2021.
Within hours of the Queensland Government announcing that the state border would reopen on Monday 13th December, interstate buyer searches for properties in the Sunshine State went up 15 per cent. Prior to this announcement, there had been a slight dip in search activity.
realestate.com.au recently reported that seven of the top 10 most popular property markets in Australia were located in Queensland. At the top of the list was Surfers Paradise, Burleigh Heads and Broadbeach.
Further North in the Sunshine State, Mooloolaba recorded impressive price growth over the past 12 months and made the national list, coming in 10th place, as did Port Douglas in 5th position, Airlie Beach in 8th position, and Palm Cove in 9th position. While other states around the country have seen the rate of price growth slow over recent months there is little sign of a similar trend in Queensland. In Brisbane, dwelling prices have risen 6.9 per cent higher over the past three months and 23.3% year-on-year.
Beyond the traditionally slower Christmas and New Year period, we expect that new listing volumes will be strong, and demand will remain strong as we head into 2022.
We are here to help buyers and sellers throughout the Christmas-New Year Period
With market activity expected to intensify at the start of 2022, our team remain available to provide buyers and sellers with trusted pre-signing advice.
At Attwood Marshall Lawyers, we aim to help people quickly so that they can be supported throughout the buying and selling process and ensure they do not miss out on securing their next property. We help our clients make an informed decision so that they can be in the best position to buy or sell in today’s market. Our property lawyers can assist in drafting and negotiating special conditions, reviewing contacts, providing advice on what searches should be undertaken when buying a property, or what sellers must disclose, ensuring there are no nasty surprises along the way for all parties involved.
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To avoid risk or unnecessary delays, it’s important to get the right legal advice. Contact our Property and Commercial Department Manager, Jess Kimpton, on direct line 07 5506 8214, mobile 0432 857 300 or email firstname.lastname@example.org
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