Just like ferrying the kids to their Saturday morning sporting events, weekend auctions have fast become a tradition across some of our major capital cities over the past couple of decades.
No longer satisfied with private treaty sales, Melbourne and Sydney vendors in particular prefer the snappy glitz of a fast marketing campaign leading up to a bidding war played out on their well manicured front lawns, with the property prize going to the combatant who pitches the highest price above reserve.
On any given weekend when the markets are moving, it’s not unusual for agents to busy themselves with around 1000 auctions in each of our two largest state capitals.
Come Monday, the media and industry statisticians love nothing more than picking apart the latest results – what sold, what was passed in – and then using these percentages as the basis to report on how well our housing markets are tracking at any given time.
Anything above or below the “averages” (a debatable figure in itself, with a margin somewhere between 60 to 70% usually considered to be ‘the average’) is swooped on with gusto, as an apparent sign of a market moving too swiftly, one way or the other.
But all the hype rarely accounts for the numerous everyday factors that influence clearance rates, and indeed the number of properties up for sale on the open market, so it’s important to put this data into some type of context before you buy into newspaper selling headlines.
Inconsistencies and context
This article was written after a big weekend in Melbourne, where a record breaking 1508 properties were auctioned, with 73% (or 1101) selling at the fall of the hammer.
In isolation, these figures indicate a strong market, with buoyant buyer activity, given the surge in stock did little to dampen the above average, 73% clearance result.
But when you view this in broader context – it happens to be the reported clearance rate for the weekend immediately prior to the Melbourne Cup long weekend – suddenly the precedent setting stock levels make sense.
Vendors are getting in on one of the last, and traditionally best, Spring selling weekends of the year before the Melbourne Cup Carnival. In fact, the next weekend after this will likely see an above average number of homes going under the hammer in Melbourne, as final Spring auctions are undertaken. Because when it comes to auctions and property markets in general…
Seasons sell. Why do you think selling agents have such a ‘spring’ (intentional pun) in their step around this time of year? Houses look their best in the fertile spring light, with blossoms blooming and birds chirping, hence more vendors want to sell, and more loved up would-be buyers are getting out in the sunshine to peruse and purchase.
As for upward fluctuations in Melbourne clearance rates immediately preceding and proceeding a major capital city holiday, we tend to see the same thing just before and after the traditional Christmas/New Year hiatus across all cities, and around various national league footy finals.
In fact a similar result was achieved this time last year, with only a few dozen less auctions for the city over its pre-Melbourne Cup, long weekend.
Interestingly, Sydney had its own stellar auction result on the same weekend, with Australian Property Monitors reporting a preliminary clearance rate of 78.9%, up from the revised clearance rate of an equally respective 77% for the weekend prior, but not quite at the 80% plus boom-time benchmark, recorded over the previous four-week period in the Harbour City.
So are they all that?
While they might be somewhat telling as to how consumer sentiment in any given capital city property market is faring at various points in time, auction clearance rates are best viewed as no more than a bit of amusement to pass the time on a Monday morning.
So many other factors are at play when it comes to the ebbs and flows of property and ultimately, all of these figures are meaningless to the property investor with a plan.
Irrespective of above, below or right on average auction clearance rates, sophisticated investors who follow their own personal investment strategy rather than allow themselves to be swayed by the incessant noise, are doing their thing and advancing toward their objectives. Ultimately, that’s what really counts!