Westpac: Australia’s auction market stabilising

From Westpac senior economist, Matthew Hassan:

Given the intense focus on Australia’s housing markets at the moment and in light of our recent commentary around the best way to interpret auction market results (see here) we are now putting out short previews each Friday and summary updates the following Monday setting out how results should be viewed.

Preliminary assessment of auction clearance rates, weekend of May 11-12 –

  • preliminary ‘unadjusted’ clearance rates: Sydney 65.6%; Melbourne 56.8%
  • assumed slippage between preliminary and final estimates: Sydney -5.5pts; Melbourne -1.5pts
  • seasonal adjustment: Sydney -0.9ppts; Melbourne -0.8ppts
  • ‘withdrawal rate’: Sydney 13.9%; Melbourne 4.2%
  • ‘withdrawal rate’ adjustment, difference between observed withdrawal rate and average: Sydney 0ppts; Melbourne -1ppts
  • estimated final ‘withdrawal adjusted’ clearance rate: Sydney 59.3%; Melbourne 53.4%

Preliminary auction results continue to show promising signs of improvement although they still need to be treated with caution due to high mark downs once final figures are in (last weekend this was a 9.4pt downward revision for Sydney vs the average 5.5pt reduction our analysis is based on). The preliminary figures this week suggest final clearance rates will again be comfortably in 50-55% range, the starting point for both being slightly above this range that historically has been broadly consistent with stabilising prices. Withdrawal rates area again back in the more normal range compared to late last year.

Note that all figures are based on preliminary and final auction results provided by CoreLogic.

For more detailed commentary on Australian Housing market, see our latest report: Westpac Housing Pulse (753kb).

I have two points of disagreement. First, final auction clearance rates are still running below the same time last year when prices were also falling. Second, auction volumes are down about 60% from last year. Neither suggests “stabilising prices”.

Comments

  1. Non-reported auction results have climbed from ~20% a year ago to ~50% today. That is the only meaningful auction statistic.

    • kannigetMEMBER

      and from about 5% 2 years prior….. lets not even mention the number of auctions themselves are down 50% to 75%…

    • I have seen so many just pulled from the marked just before auction.
      I have even seen one pulled from auction and the RE stuck a sold sticker anyway on the board.
      The ones left that go to auction are generally a bit more positive that they might get a sale

  2. Sydney yoy prices on Corelogic are reporting the fastest falls ever during this correction cycle, presumably meaning daily falls during May ’19 are bigger than daily falls during May ’18. Not very suggestive of ‘stabilising’ either.

    • Yeah I noticed this. The slowdown in price drops has just reaccelerated. As of today the Sydney index has dropped 0.61 points in the last week, which equates to -0.4%. Continued at this rate would give you -5.2% for quarterly. -20.9% annualised.

    • Yup. I keep saying easter was an overnight u turn last year and i can see it this year too
      Before easter there were atleast 1 or 2 greens on 7th e daily index. I habe been watching every single day since easter last couple of weeks and only 1 green against massive reds till now. Today -0.13. Early but id still say.. It is on.

  3. elasticMEMBER

    The % of unreported auctions in Sydney at the moment is laughable.You’d think with so many fewer auctions to report, the REAs might have found the time. As someone posted earlier, the % of unreported was about 5% when the market was strong a couple of years ago. Sydney is still down in the low 40’s as far as clearance rates are concerned.

    • By my reckoning on those CoreLogic numbers, the fall in the first half of May beats any other half-month fall this year (looking at Sydney).

      Stabilisation is a gutsy call.

      • Almost – today’s two week rolling loss in Corelogic Sydney was 0.66%, which is the fastest two week fall since 24 Jan when it was 0.68%. The worst for the year was slightly before that at 0.75% on 21 Jan. The worst this cycle was 0.9% in December last year.
        However, note that on the same date last year, the two week loss was 0.39%, and it took until November to see two week falls above 0.6%

      • As Robert said, the declines at end of last year were really nasty. Compared to those the quarter on quarter figures appear to have have eased up, which may be why some spruikers are calling the bottom.
        But the year on year number just keeps growing – over11% now! You would have thought it would plateau 12 months from when the market turned in 2017 but it is getting worse/better

    • +1
      Second, auction volumes are down about 60% from last year
      This is what happens when people fixate on using just one metric to define a complex market (see GDP).