Every week in print , digital media ,television news and radio a clearance rate percentage is released and depending on whether it is low or high we all get to feel good or bad about property for the week.
The weekly clearance rate , however , is the most inaccurate measure to determine the health of our property market.
The clearance rate will be different for every suburb and so it’s a long bow to apply this universally across Melbourne.
Further, clearance rates represent less than 30% of all sale transactions.
The majority of sales are conducted by private treaty.
How are private treaty sales being analysed with respect to the health of our property markets?
In weaker/ low confidence property markets more private sales are completed in comparison to auctions.
In strong property market conditions, more auctions are conducted
Even more confusing is there are 4 different clearance rates produced each week!
Which one do you believe and which one is more correct?
Last weekend in Melbourne here is what was reported:
Domain I 1134 auctions I Clearance rate I 56%
REIV I 756 auctions I Clearance rate I 65%
Realestate.com.au I 511 auctions I Clearance rate 75%
Corelogic I 1264 auctions I Clearance rate 57.9%
Average I Clearance rate 63. 50%
There is a strong correlation between Clearance rates and capital growth.
What I do know is that based on my experience is that the above does not correlate to falls in property values.
At 80% – This is regarded as a Boom market with typically 4- 6 bidders at auction resulting in annual capital growth of 20% plus
At 70% – This is a good market and generally there are 3 bidders at auction resulting in annual capital growth of 8 % -10 %
At 60% – 65% – This is balanced market with generally 2 bidders at auction resulting in annual capital growth of 5% – 8%
At 50% – 55% – This is generally a buyers market with 1 – 2 bidders at auction resulting in nominal capital growth of 0 – 3%
At 40% – 45% – This is a falling market. Buyers have retreated and most property is passed in. There are more private sales and auction campaigns decline. Typically property prices fall – 5% to -10 %