Auction clearances dip on higher volumes

By Leith van Onselen

Auction clearance rates fell slightly over the weekend in Australia’s two major markets, although volumes were up significantly.

In New South Wales, a provisional auction clearance rate of 58% was recorded from 436 auctions reported to the REINSW. This compares to a provisional clearance rate of 63% recorded last weekend on 392 auctions, and a year-to-date clearance rate of 60%. However, the number of homes auctioned was well below the same weekend of last year when 545 auctions went under the hammer.

In Victoria, a provisional auction clearance rate of 60% was recorded over the weekend on 619 auctions reported to the REIV. This compares to a provisional clearance rate of 61% recorded last weekend on 511 auctions, which was later revised down to a clearance rate of 58%.

Although this weekend’s provisional clearance rate was above the 56% clearance rate recorded in the same weekend of 2011, the number of homes auctioned was lower, with 619 homes going under the hammer over the weekend versus 644 auctions in 2011. The result was also well below the same weekend of 2010, when a clearance rate of 69% was recorded on 754 auctions.

Once again, last week’s auction clearance rates published by the REINSW and REIV – 63% and 61% respectively – were more positive than those reported later in the week by RP Data, where clearance rates of 57% and 55% respectively were recorded for Sydney and Melbourne:

Twitter: Leith van Onselen. Leith is the Chief Economist of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.

Leith van Onselen

Comments

  1. Can’t comment on the Melbourne auctions but anyone else noticing a real surge in people (probably bargain hunting tyre kickers) at open for inspections over the last few weeks? I did a structural inspection for a client on a home that was sold from under them within a week of listing. Price was 20% above sales from a year ago in the pocket, yet 1 km away I can see examples still sitting there at 20% under 2010 highs. Madness.

    • I’m renting, but went to the Open Home down the road on Saturday, just for a look-see. From what I saw, so did all the neighbours! I wonder if they wanted to add to their portfolios or were looking at the competition…..

    • Hey David – how did that house at 50 Princes St Bexley go – you were predicting losses for that little place – what was the wash up at that auction?

        • About that ‘tidy little profit’. Let’s do the sums compliments of one of our contributors who actually attended the auction on the day.

          http://bubblepedia.net.au/forums/viewtopic.php?f=4&t=967&p=4735#p4735

          “On the face of it:
          BOUGHT 2006: $495k
          STAMP DUTY: $20k
          SOLD 2012; $795k
          GAIN: $280k
          RENO; $-100k

          $180k PROFIT”

          However, what is the reality?:

          But if we factor in mortgage repayments:
          Lets stake the median loan size of $300k, over 25 years, averages out at $1973 per month.
          Total cost of mortgage repayments over 5 years was $120k
          or $500 per week. Which coincidentally is about the same as the current median house rent in bexley, $520pw. (http://www.propertyobserver.com.au/data … bexley-nsw)

          So to re-assess
          BOUGHT 2006: $495k
          STAMP DUTY: $20k
          SOLD 2012; $795k
          GAIN: $280k
          RENO; $-100k
          MORTGAGE; $-120k

          $60k PROFIT after 5 years.

          Its most likely they bought the house with a 300k loan and gradually paid the 100k renovations as they went. Therefor its reasonable to assume they started with around 200K savings.

          If I put 100k in the bank at 5% pa I get 5k per year. Or in their case, $200k savings gives $10k p.a. Now, we’re already pretty close to the annual average gain on this investment of $12k.

          Of course savings interest compounds. So at 5%, 200k would have generated $57k interest after 5 years. Add to that savings account the 100k they put into renovations, and even with tax on savings its likely cash would have beaten this property investment.”

          Now looking at these figures, why would you bother with slogging for 5 years for a measly 60K when you could have arguably done better with money in the bank.

          Rent money is dead money? Try harder…
          Prosperity gain of $12k per year.”

          So Aussie Contrarian, they arguably would have been MUCH better off having their deposit

          • Aussie Contrarian

            Bobby, you’re forgetting about the rent! If they had put the money in the bank they would have had to fork out dead money in rent for the entire five years! Ouch!

            Also, they may not have paid stamp duty, and they may have been given a homebuyer grant, making their profit even higher!

            These vendors did very well for themselves. I applaud them.

          • Aussie Contrarian

            You say the median rent in Bexley is $520pw? So that’s 520x52x5=$135K they saved in rent money on top of the $60K sale profit, plus maybe a 7K grant?

            They’re looking at a $200K profit easy.

            Nice!

          • Aussie Contrarian (your name is a misnomer by the way, given you seem to be a property bull)

            You forget the following:

            – cash sitting in the bank implies very little to no risk;
            – the interest on their savings paid at least half their rent in my hypothetical scenario;
            – the couple in question took a large gamble, going ‘all in’ on one asset in the mother of all housing bubbles (Australia isn’t different)
            – as noted by other commentators, 5 years of hard reno is not the pleasure reality TV shows make them out to be. A paltry 12K return a year for back-breaking work is virtually slave labour
            – the property market is replete with examples of failed renos where people lost a lot of money;
            – so subsiding your rent by holding off on property investment & taking no risk while the property market continues to tank nationwide is a no brainer
            – feel free to work out the yield of 12K per annum on a 650K investment -> it is simply shite. Almost anything would have returned significantly better returns. In other words, they have dudded themselves out of better returns in other asset classes in addition to paying themselves 12K a year between TWO people (6K each) for back breaking work (they admitted themselves the lot was a swamp to begin with)

            Conclusion: rent money is not dead money when it implies freedom, little risk, not being tethered to the bank for 25 years only 90 days away from foreclosure for that entire period as we slowing slip into a debt deleveraging cycle which could last 10 – 15 years based on Prof Keen’s work.

          • Aussie Contrarian

            I don’t see any “fleshing out” there. It just seems to be the same stuff Bobby wrote here plus a personal attack on me.

            The couple made a $20OK profit. That’s the bottom line.

          • They didn’t make 200K, they made a pissy 60K. Further, a gross yield of 1.8% on 650K for 5 years slave labour is simply pathetic. Plus they lost untold hours of social and family time to a swamp!

            If by attack, you mean your ignorance of asset deflation in housing markets all round the world (happening here now since mid 2010) – then yes, you need to read up and educate yourself on Ponzi financing pronto lest you believe your own rhetoric and undertake a reno in the next few years and destroy your financial future.

      • So considering a price tag in the mid 600s was going to result in an approximate 100K loss after considering opportunity cost (mortgage financing and the like), you are telling us PF that they made what 50K after 5 years hard work in fixing up a place that was a virtual swamp beforehand.

        Wow – 10K a year for a 5 year reno.

        Where do I sign up? PF can you organise me some finance quick. Perhaps a 1 day ABN workaround could be on the cards, I hear they’re popular?

        • Aussie Contrarian

          You’re forgetting all the dead rent money they saved by living in their own home. Nice to have your own place with secure tenure for five years, and maybe they enjoy renovating – many people do.

          • What is this “dead rent money” rubbish?

            Rent money gets you a place to live. It’s a lot less “dead” than the money the owners spent on stamp duty, transfer costs, land tax, rates and loan repayments.

          • “”Nice to have your own place with secure tenure for five years, and maybe they enjoy renovating – many people do.””

            The vast majority of people I know who have renovated to sell, hated it….and spare us the nice to have your own place bull***t as last time I checked most people would prefer to rent than live on a building site.

            Having half a house missing and not able to lock-up especially during winter is hardly ones idea of home renovation/ownership bliss.

            Think before you spout the usual spruiker ‘verbal diarrhea’, you just look like a moron.

          • Aussie Contrarian

            Arrow 2, given the vendor’s original purchase price, they probably didn’t pay stamp duty. They wouldn’t have paid land tax either. Loan repayments were already counted in the cost case.

            They probably got a grant to buy too. Nice profit, and nice work! Well done to the vendors!

          • Aussie Contrarian

            Christiaan, is that how you speak to your friends and family too… ‘spruiker verbal diarrhea’, ‘you just look like a moron’ etc? I hope not! Are you just upset because the house sold for such a good price and the vendors made a nice profit?

            PS. Lots of people enjoy renovating.

        • Aussie Contrarian

          Overall, it sounds like the renovations subsidised their rent for five years, and they also made a tidy profit at the end. Fair play to them I say!

  2. it always strikes me how many unreported results NSW has, enough to move the clearance rate by a significant (10%+) amount. Who can take these figures seriously?

  3. No sign of a pre 1 Oct (removal of FHB grant) surge in Sydney clearance rates or volumes? Only 2 Saturdays to go.

  4. I got a flyer in my letterbox today which reads as follows:

    “THINKING OF SELLING YOUR PROPERTY?
    _Now_is_the_time_ to take advantage of the
    expected further increase in demand!!”

    Whoever wrote it must have totally failed Economics 101. How could now be the right time to sell something for which demand is expected to increase further in the future?