Auction clearance rates lacklustre

By Leith van Onselen

Auction clearance rates over the weekend remained lacklustre in Australia’s two major markets.

According to the REIV, Melbourne recorded an auction clearance rate of 56% over the weekend, which was the same as the previous week (revised down from 57%) but below the year-to-date average of 61%. The number of reported auctions (544) was also well below last week’s level (626) and the same weekend last year (681):

According to the REIV’s 2012 State of the Victorian Property Market report (see my other post), both the number of homes for auction as well as the clearance rate are well down on the five-year average (see below table).

Auction results were a little stronger in Sydney, which recorded a clearance rate of 60%. This was a modest improvement on the same time last year (56%) and in line with results recorded over the past 12 weeks:

To date, the recent -75 basis points of cuts to official interest rates since early-May has done little to reinvigorate the auction market.

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Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

Comments

  1. To date, the recent -75 basis points of cuts to official interest rates since early-May has done little to reinvigorate the auction market.

    I’d say holding the line where it is is a decent achievement out of those cuts. Slow melts aren’t easy if sales start dropping through the floor.

    • My thoughts exactly! We can’t assume that the cuts have been ineffective simply because growth hasn’t returned; how much shrinkage did they prevent?

      Interest rate cuts are all about engaging marginal buyers into the ponz… er… market. But now we’re getting to the marginal sellers (as well as those who are clue-y enough to get while the gettin’s good).

      I saw this happen in the US RE market in 2006-08. I don’t know what WILL happen next, but I’ve got a good idea what MIGHT happen…

  2. To date, the recent -75 basis points of cuts to official interest rates since early-May has done little to reinvigorate the auction market.

    No surprise as lower interest rates did not save other property bubbles from popping in America, Ireland, Spain….

    People are becoming debt averse and will not rush into buying overpriced homes knowing that house prices are falling.

  3. To date, the recent -75 basis points of cuts to official interest rates since early-May has done little to reinvigorate the auction market.

    yes, and it looks like the REIV is starting to work this out as well….

    REIV spokesman Robert Larocca said. ”At other times, interest rate cuts have boosted consumer confidence, but they aren’t making consumers confident now.”

    if the REIV had bothered to look into any of the recent housing market crashes they would be well aware that lower rates, even cutting to ZERO, makes no difference once the bubble burts.

  4. thomickersMEMBER

    with the first announcement the clearance rate including withdrawn/postponed/unreported was around 45%.

    • Of the 239 passed in in Vic REIV stats, 158 were on vendor bid. Clearly there is a mismatch between seller price expectation and market reality.

      Also noticing lots of ex-investor stock on market in area Im intersted in (blackburn and surrounds) (townhouses, land with plans…). Only few family homes I’ve looked at were from estates (deceased or moving into retirement homes.

  5. Something worth keeping an eye on are the number of auctions compared to the same weekend last year. This contrast is really given in the ‘auction results’ each week.

    50% of 500 auctions is a lot more impressive than 50% of 250 auctions as an indicator of the level of activity.

    The results for Sydney this weekend showed only 241 auctions. That looks like a small number even though I don’t have the historic data to compare with recent years.

    http://domainmastheads.homepriceguide.com.au/saturday_auction_results/Sydney.pdf

    56% might appear reasonable but not if it is 56% of a small number.

  6. A few points on the REINSW result…

    So, 459 reported + 45 withdrawn + 15 postponed = 519 total.

    A whopping 145 unreported, which, when combined with the 519 above, gives a whopping 21.8% unreported! (145/(519+145).

    What’s more, let’s take into account those withdrawn and postponed, knowing that most withdrawn auctions tend to be because of a lack of bidders.

    So, a total of 275 sold, which gives a real 53.0% clearance rate (275 / 519) when measured in the same way as APM and RP Data.

    • I have first hand experience with clearance rate data. 4 units where I live were aucioned last Saturday (4 separate auctions), none was sold. I checked weekly auctions clearance alert and they were not reported!!! I don’t believe this was isolated incident. I have a feeling that most not reported properties were not sold. Agents are getting desperate!
      A month ago only one of the units was put for aucton. One person attended, highest bid 400 000. After auction wendor rejected the offer of $420 000 (auction was not reported). This unit was the worse of 4 units.
      Last saturday highest bit was $385 000 for best unit!
      All 4 units are for sale by negotiaton now.

      • I do the same on two postcodes in Melbourne, average of 10 properties for auction before weekends, lucky if half turn up in data after weekend….

        Clearance rates are fudged and used to “suggest” health in the market.

        Even if they were valid and reliable, using REIV’s own data, clearance rates show a drop of 25%+ in interest, successful auctions etc. in the past two years….

        Doesn’t say much for the honesty and transparency of Australia’s MSM and a supposedly important industry?

  7. Leith, the REINSW also publishes an intesting figure, which is the number of private sales for the past week. That is well worth watching as well (I used to do it on another forum – non-troll one – before I got lazy).

  8. Also, a small percentage of auctions never even make the total figure. According to REIV, their preview predicted 630 auctions for last weekend.

    However, when you add up the Sold (305), Passed In (239), and No Result/Postponed 67) in the Vic auction result snapshot, the total only comes to 611!

  9. MsSolarFelineAU

    Yes, housing sales *are* declining in Australia.

    We *are* the same as every other country who has experienced house-sale declines.

    Real Estate people should be patted on the head, and sent on their way.

  10. Others in this thread have amply made the point about very low volumes. Thank you.

    Th spruikers are now pretending they knew the 2010 prices were aberrant. This rewriting of history cannot be tolerated. Guys, you claimed the market would go onward and upward forever. Produce a document or newspaper article backing this claim or be held up to career-damaging ridicule. You have been warned.

    Don’t Buy Now!

  11. But But..the radio told me today that houses in Perth were going to go up 22% in the next year or so…

    I cant believe they are even allowed to play that on air or release projections like that

  12. MsSolarFelineAU

    It is up to us, as Sovereign Individuals to discern the bullsh*t that is pushed by the vested interests in this country, and decide what is best for us and our families.

    If that means going against the herd, well, that’s what we need to do.

    • “It is up to us, as Sovereign Individuals to discern the bullsh*t that is pushed by the vested interests”

      Ordinarily this would be totally fair comment , but in the case of this generational property boom, sovereign individual thinking has been subsumed by the mania. What really rankles is the way certain MSM has been so overwhelmed by greed that they now find that they cannot bail the sh*t from their floating nests fast enough. A remarkable case of auto crap eating with the inevitable outcome.

      • MsSolarFelineAU

        Oh deer. Turn off the telly, and turn on your brain and critical thinking. I *am* not attacking you personally. Please do not think that.

        >>Ordinarily this would be totally fair comment , but in the case of this generational property boom, sovereign individual thinking has been subsumed by the mania.>>

        Well, to get ahead in Life, don’t think like everybody else!! One *needs* to be contrarian/not be a part of the “herd” if one wishes to be ahead of others….

        *head hits desk*

        • nah – I don’t think you’re attacking me. You’ve read me wrong/ I haven’t explained myself. I’ve stood staunchly/ stoopidly aside from the property mania for many years, always thinking that if the maths doesn’t add up to a reasonable conclusion, the equation is prob wrong.
          I’ve lost more than I wish to remember on the stock market,but at least I had the opportunity to be stop-lossed out of the beast. Property has no such fall-backs. It’s an article of faith – you believe or you don’t believe, and at these levels of debt – there is so much to lose. I know the sickening feeling of crystallising hard-earned losses, but at least it didn’t leave me with only enough to buy sleeping bags and candles.

  13. ceteris paribus

    I read last week an article by Chris Joye in the Business Spectator, where he was arguing that the RBA rates cuts “were coming home to roost”.

    From the best of my memory, which in all fairness may not be saying much, he was arguing that recent rate cuts had had a discernible upwards impact on national house prices over the last 6 weeks or so and that further growth in prices was likely, especially with further cuts.

    So the conflicting hypotheses are now out there again in stark contrast- further falls from debts and disleveraging versus revival in prices in a lower rate context.

    Let the data of the next four to six months decide!! I know which hypothesis I am betting on.

  14. UE, it would have been good to see the half time scores of NSW and maybe QLD too over the last 5 years to get a better understanding on where we urrently sit.

    Perhaps you can include state by state and national half time scores in another post.