Auction Clearance Rates Trending Ever Higher
Results for week ending September 18.
Supply held relatively steady across the combined capital cities this week as 2,093 homes were auctioned, up from 2,062 last week. The number of buyers in the market appears to have jumped this week, with bidders posting a preliminary clearance rate of 77.9 percent, 2.5 basis points higher than last week’s final reading.
The City Stats
Demand soared in Sydney, where this week’s initial figures show 85.1 percent of 773 auctions cleared successfully. Last week’s final result was 80.6 percent, on slightly lower volume of 758.
Melbourne was again the most active market, with 956 homes brought to auction, down slightly from 974 last week. The clearance rate remained mostly steady at 78.0 percent. Last week’s final result was 78.3 percent.
Adelaide buyers were also keen. The city posted a preliminary clearance rate of 76.5 percent this week.
The Graph
The Preliminary Numbers
Sydney | Melbourne | Brisbane | Adelaide | Perth | Tasmania | Canberra | |
Clearance Rate | 85.1% | 78.0% | 55.1% | 76.5% | 40.0% | 28.6% | 70.8 % |
Auctions | 773 | 956 | 139 | 96 | 20 | 7 | 83 |
The Analysis
We’re now in the third week of the spring selling season and auction clearance rates are still trending up, approaching the highs we saw in the first half of 2015. With demand strong and the supply pipeline bleak, hungry buyers continue to compete for fewer properties.
It’s not uncommon in such an environment for unsuccessful bidders who keep losing to become frustrated, forget logic, and bid above their previously set limits. Until APRA steps up to put a damper on this craziness, we’ll likely see property prices in Sydney and Melbourne go higher over the next two months.
What It Means For Investors
The RBA is playing it cool when it comes to home prices, believing that the strength in the auction market is superficial. In the minutes just released from the latest monetary policy meeting, Glenn Stevens downplayed concerns about a property market bubble. He pointed to rising rental vacancy rates, lower auction volume, declining turnover in the private treaty market, and softening housing credit growth.
Whether new RBA Governor Philip Lowe will be pushing for further rate cuts is yet to be seen, but if the most recent statement is any indication, he likely isn’t concerned about fuelling a housing bubble. Unless the U.S. Federal Reserve surprises markets and raises interest rates, we could see another RBA cut in the not-too-distant future.
If you’re not sure exactly what to do amidst all of this craziness, check out Steve McKnight’s latest post, “When Crazy Becomes ‘The New Normal.’”
For the historical data of weekly auction clearance rates, click here.
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No mention of total sales compared to last year (preferably adjusted annually for population growth).
I think you’ll find the 85% clearance rate in Sydney isn’t that big a deal based on smaller volumes of sales.
Not a big deal in what way? Price growth at the micro level is a function of both supply and demand, not just demand. In other words, you can have fewer buyers in a market and prices will rise when supply is low.
The RBA board may claim they’re not concerned, and point to lower supply, but I don’t buy it. APRA will step in shortly, even if only in Sydeny and Melbourne.