Auctions on the rise

The number of auctions held across Australia has increased consistently since the first week of August when just 817 auctions were held. The last week of September and first week of October saw a slight reduction in auction volumes due to Grand Final season, however the number of auctions scheduled for this weekend is set to be one of the largest, with 1,670 auctions scheduled.

As auction volumes have ramped up, so too have auction clearance rates. The national weighted average has been above 70% for the last 15 weeks.

Auction clearance rates are often used as a timely barometer of real estate market sentiment. When clearance rates are high we can assume that there is a healthy level of optimism among buyers and that vendor expectations about the value of their property is aligned with buyer expectations. On the flipside, when clearance rates are low we can generally infer that home buyers are more cautious and vendor expectations may not be aligned with market conditions.

Clearance rates have more relativity to some markets than others. Arguably, they are most relevant to the Melbourne and Sydney market where 85% of the nation’s auctions are held each week. In Brisbane, auctions account for just over 7% of all auctions nationally, followed by Adelaide at 4%, Canberra at 2.7% and Perth at 1.6%. Tasmania and the Northern Territory account for less than 1% of the overall auction market.

RP Data calculates clearance rates based on the ratio of ‘cleared’ auctions to those auctions that did not ‘clear’. Cleared auctions are counted as those that sell at auction, before the auction or within two days after the auction. Uncleared auctions are those that are either passed in or received a vendor bid only or those that were withdrawn from sale in the week prior to the auction.

We collect our auction results directly from the real estate community via our in-house call centre and from our subscribing real estate agents who submit their information directly. Each week RP Data collects, on average, 85% of auction results before publishing our results on Thursday morning every week.

At the capital city level, auctions as a method of sale are most popular within Melbourne where 29% of homes advertised for sale are auction listings – more than double the national average of 14%. At the other end of the spectrum are Perth and Hobart where auctions are very much the exception with less than 3% of homes being sold under this method.

Generally, auctions as a method of sale are most popular with prestigious properties or those that have unique characteristics where it is difficult to determine a market value. The most popular auction markets tend to be areas with very high housing values such as the Yarra, Glen Eira and Darebin council areas of Melbourne and the Waverley and Woollahra council areas of Sydney.

The auction process relies on a solid marketing campaign to ensure the auction date is well publicised and prospective buyers have time to inspect the property and arrange for building and pest reports. ??For those buying a property at auction, it can be difficult to know how much to bid, which is why doing your due diligence is of the utmost importance.

There are a variety of options available to gauge the value of a property including researching comparable recent sales or obtaining a valuation on the property (AVM’s, which are automated valuations generated based on a computerised algorithm, are becoming an increasingly popular and cost-effective solution).

Tim Lawless is the Director of Property Research at RP Data.