Auction clearance rates weaken as results go MIA

By Leith van Onselen

Reported auction clearance rates weakened over the weekend in Victoria, as the spring selling season came to a close. Once again, there were also a large number of unreported auctions, particularly in New South Wales, which places a cloud over the reliability of the results.

The Real Estate Institute of Victoria (REIV) reported a provisional auction clearance rate of 57% on 822 results reported to the REIV. This compares to a provisional clearance rate of 60% initially reported last weekend on 875 auctions, which was later revised down to 59% once some late results were chased-up. With around 920 auctions initially planned over the weekend, there are a large number of missing results, which could lead to the clearance rate being downgraded as further results arrive.

Although this week’s reported clearance rate is once again a bit rubbery, given the high number of missing results, it is still above the same weekend of last year, where a clearance rate of only 53% was recorded on 882 auctions, and is also looks to be in-line with the 57% clearance rate recorded in 2010 on 1,235 auctions.

In New South Wales, where auction data is less transparent and accessible, a provisional clearance rate of 62% was reported on 346 auctions by the Real Estate Institute of New South Wales (REINSW), which is the same clearance rate as reported by the REINSW in the previous weekend. However, there were 159 auctions with “no result”, once again rendering the headline result next to useless:

Once again, to highlight the questionable reliability of Australian auction data (particularly in New South Wales), check out last week’s auction results published later in the week by RP Data after outstanding results were chased-up:

Last weekend’s final clearance rate of 59% reported by the REIV was 6.5% above that published by RP Data later in the week. Worse, the REINSW’s reported clearance rate of 62% was 10.5% higher than RP Data’s. Part of the reason for the divergence is that the REIV’s final clearance rate captured only 930 results (versus RP Data’s 986) whereas the REINSW captured only 302 results (versus RP Data’s 600).

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.

Comments

  1. They have no reason covert this data if it wasn’t counter to their preferred out come. Do we really think they would miss an oppertunity to show a win? It would be like a Collingwood fan under reporting a winning score. If they lose they claim to have missed the game. (data for this statement gained from friends and colleagues)

    I say that we default to “no data = no sale. Same for withdrawn. Basicly if a property was offered up and didn’t sell for what ever reason, we should run an either/or. Set of numbers.

    Might not be super accurate but would balance the spruke.

  2. douglasp
    December 17, 2012 at 9:02 am

    REIV are crooks. 470/950 = 49% clearance rate. They publicized 950 auctions.

    Agreed, but why not just publish our own, which we can, from now one its VIC 49% and if more people get behind this and just follow it then it would become the norm.

    We can say,
    VIC %57 incorrect
    VIC %49 correct

    • It is a farce, but they can only hide it for so long and the damage is . The numbers aren’t getting people back into the market. The govt is losing revenue on stamp duty. The lending numbers are down.

      It’s amazing the lengths people will go to keep up appearances.

  3. I thought this matter of unreported auctions (or, non-auctions) was a long-established and well-known, albeit highly aberrant practice? I learned about this 2 years ago and have never trusted the REI auction clearance figures since. In fact, anything coming from the REI’s should be taken with a healthy dose of skepticism. The term “perceived conflict of interest” comes to mind.

  4. The real estate agents know that current and prospect clients look at the results on Monday.
    Times are good and they’re getting strong results, the agent will rush to register the sale by Monday. You’ll see 100% of sales published with the result.
    Times are bad they’ll hold back as long as possible or wont publish at all.

  5. Whilst auction result reporting is a farce, I’m interested in the 100’s of people buying property every week. Don’t they know the capital gains ship has sailed? (mind you I though this in 2008/9 also before the govt propped the markert up).

    • I suppose that in 08/09 the global economy had some petrol left to stoke the fire. Not much left this time round.

      • That’s a substantial discount on the ‘estimated’ value. Who are “On the House” anyway – I’ve been looking at some of their valuations recently and I wasn’t sure what they were supposed to be based on? Professional valuations? Council rates? Either way they seem to be skewed towards the optimistic side.

        $245,000 for a four bedroom house in Epping is a much more realistic valuation/price than $400,000.

  6. The van Onselen auction ‘rubbery index’* currently sits at:

    a) .115 (11.5%) for Victoria
    b) .315 (31.5%) for NSW

    * Missing results / (reported auctions + missing results)

    Interpretation: Auctions are smelly in Victoria, but outright rancid in Australia’s most expensive state.

    The ‘real van Onselen rubbery index’* is even worse:

    a) .125 (12.5%) for Victoria
    b) .348 (34.8%) for NSW

    * Adjusted for infantile REI calculations which must be performed whilst wearing over-sized, rose-coloured glasses three inches thick.

    In other words, adds to the auction total: ‘withdrawn’ (I don’t care why they were withdrawn – the outcome is still a failure to sell), ‘postponed’ (ditto) & sold prior to auction is removed from the auction pile (the sale didn’t occur under the hammer nor was there the auction process and negotiation thereafter to settle on a possible price – so, it’s gone)

  7. I am always puzzled as to why ANY attention is paid to the so called auction results. They represent such a small proportion of sales that take place nationally and more relevantly it is the price they sell at that, that is the real indicater of where the market is heading. The actual sale price compared to listing or reserve price is the telling factor. Not what dismal result that is achieved after throwing many thousands of dollars advertising the agent… oops I mean property.

  8. Bobby Fischer I like your style!

    Lets not cloud the issue with words.

    Spade = Spade, it’s not a sliding scale.

    Small portion or not Roger, auctions have been hailed as the sales barometric indicator for some time and that’s exactly the context the RE world present them as.

  9. I have a sneking suspicion that ‘an’ auction may be part of the forclosure or bankruptcy process. The reason for this is that localy houses are on the market, price reduced, make an offer and then months later are put to auction. 2 months after the failed auction ‘Its Sold’
    I am guessing that if there is a legal obligation to discover the ‘value’ of a property before the necessary court applications can be processed.

    • Very expensive way of testing the market. $5 or $10k to run a campaign to have some tyre-kickers throw low-bids seems pretty unlikely. Plus you would need a ball-park estimate of value to advertise at…. Bankruptcy process is expensive for creditors – I’d say the most cost-effective solution would be to wrap up the thing ASAP…

      Many banks will have their own guys value a property before loaning the $$$. If the price is $600k and you are borrowing $450k, the banks is going to get $30k – $40k p.a. out of you (interest & principal). Meanwhile they pay the deposit holder at the bank about $15k. In this case if you default after one year they pick up a $600k property, plus have garnered maybe $20k in interest margins from you.

      The alternative of holding a property without any income coming & paying legal/admin expenses in is a costly exercise.

      There could be something in it, but I wouldn’t have thought