Over the years, weekend property auction results have become a key barometer the media uses to illustrate the housing market’s strength at a given moment.
For decades, it has mostly been a relatively rosy indicator, with headlines about record prices frequently appearing in the nation’s financial and property-focused mainstream media.
But amid the current downturn, the mood is now the polar opposite, with housing prices falling at what some price indices suggest is the fastest pace since records began in the 1970s.
Meanwhile, the Sydney auction market in particular is performing terribly, with SQM Research (the gold standard for auction data) recently revealing its weakest result since it began recording in February 2020.
But signs now suggest a new low as early as Tuesday afternoon, when SQM posts its results.
Over the weekend my auction clearance data, which has been given the tick of approval as a solid preliminary indicator by SQM Managing Director Louis Christopher, produced its weakest Sydney result since the data set began over 8 years ago.
Unlike other auction clearance figures, it doesn’t ignore unreported auctions; it simply takes the number of properties scheduled for auction that have been reported sold (by whatever means) and divides that by the total number of scheduled auctions. More on the methodology in detail at the bottom of the page.
On this metric, just 24.6% of Sydney properties listed for auction this week were reported to have been sold by any means as of the release of Domain’s preliminary data on Saturday night.
A fortnight ago, when SQM recorded its weakest result ever (27.1%), the results for my preliminary data were also 27.1%.
In my weekly roundup posted on X (formerly known as Twitter), I concluded that: “If this is reflected in SQM’s results come Tuesday, this is a market deeply in trouble.“
This conclusion by Louis Christopher in a retweet:
“The Sydney housing market is indeed in deep trouble.“
This outcome was predicted by Christopher in a tweet earlier in the week:
“Auction volumes should keep ramping up from here through to the end of November.
So I expect Sydney clearance rates to fall back to the 20s shortly. It’s one hell of an ugly market for sellers.”
The Takeaway
As the nation’s most expensive market, and one seeing by far the largest outflows of its population via domestic migration, it’s perhaps unsurprising the Sydney auction market is performing so poorly.
With a median house price of $1.66 million, it still has a long way to fall before affordability returns to even 2019 levels, let alone the more genuine home-price-to-income levels seen in the late 1990s.
Ultimately, it may not be the market that finally decides where the bottom is for the housing market; that role may once again be played by the Reserve Bank and the federal government.
After all, they have a long history of interventionist policy.
Methodology Differences
When Domain, Cotality, or any number of other property data sources produce their preliminary auction results on a Saturday evening, it perhaps isn’t based on what one would think at first glance.
Instead of taking the total number of properties sold (by whatever means, pre-auction or on the day before 5pm) and then dividing it by the total number of properties up for auction, their approach takes the number reported sold and divides it by the number of properties where the agents or auctioneers have provided a result.
This is illustrated in the graphic below from Domain. In Sydney in July last year, 320 out of 954 (33.5%) auction results were unreported as of the time of the publishing of the preliminary figures. In Melbourne, where the market is performing significantly more strongly than Sydney, the Domain results would suggest 205 out of 867 (23.6%) were missing.
As you might expect, some agents are less than thrilled to report a failed sale, so the results go missing. On some auction weekends when the market isn’t having a great time, well over 1/3 of results go unreported.
When the market is extremely hot, as it was in 2021, then the unreported rate drops well into single-digit percentages.
This issue has been well covered by property sector expert and industry veteran, Louis Christopher, the Managing Director of SQM Research.
It’s worth noting that the gold standard for hard data auction results comes from SQM on the Tuesday following the auction weekend. You can find that here.
