Auction clearance rates are an important lead indicator

It has been suggested that reporting on auction clearance rates is a waste of time, but in a recent blog RP data went to some trouble to dispel what they called a myth.

RP Data estimated that during 2009 about 57,500 capital city properties were auctioned. Over the same period there were about 317,000 house and unit sales across the combined capital cities.

They went on to say:…
Given this, only 18 per cent of sales were via the auction process. During 2009, the average auction clearance rate across Australia’s capital cities was 69.2 per cent. This result indicates that only 12.5 per cent of all properties transacted are actually sold at auction. So why does everyone sweat on the weekly auction clearance rates?
In Melbourne and Sydney, in particular, auctions are a big deal. Last year, more than 26,000 Melbourne properties and 20,500 Sydney homes were auctioned.

These two cities account for about 80 per cent of Australia’s entire auction market.  In Sydney, auctions account for about 20 per cent of all sales and in Melbourne the proportion climbs to 30 per cent. In the other capital cities the proportion is much lower, which is why RP Data and most media outlets don’t focus too much on auction clearance rates outside of Sydney and Melbourne.

Historically, Sydney and Melbourne have been the leaders of the national property market, so by measuring their auction market we gain a good insight into the overall health of the Australian property sector.

There are plenty of survey results published based on a sample size far less than 18 per cent of businesses, households, consumers etcetera.

The collection of auction clearance rates is one of the most timely lead indicators and a good measure of the balance between vendor and buyer sentiment. As a property market analyst, it provides quality insight into what is happening in the market before we can confirm our suspicions with a complete data set.
A good example of this occurred recently. Clearance rates have been easing in Sydney since late March, and in Melbourne since mid April. In the middle of March, the most up-to date finalised external property data available to us was to January 2010, which was indicating that the market was still going strong and values were increasing at a rapid rate. Despite this, housing finance volumes had been falling, interest rates had been rising and clearance rates were easing.

This has been confirmed by property value growth for April of 0.2 per cent for the month compared with 1.3 per cent value growth in March.

There are certainly some shortcomings with auction clearance rate data, but there are weaknesses in any analysis which only looks at a portion of the population of data.  For example, in most regions it is only going to be higher priced properties, waterfront properties or other unique property types which are taken to auction.  As a result, the auction clearance rates may not be a totally accurate measure of the entire range of housing stock.

So what are the auction clearance rates currently telling us? Auction clearance rates have been trending lower over the past 12 weeks. This indicates that the market is continuing to slow.  A market slowdown certainly seemed inevitable, especially given that capital city property values have increased by 12.1 per cent over the year to May.  We have been expecting property value growth would be much lower in this calendar year than it was during 2009.

As for auction clearance rates, we wouldn’t expect too much further softening in clearance rates.  However, they will likely remain around current levels until the spring selling season. With weaker clearance rates we’d also expect that the number of properties being taken to auction to also ease.

RP Data provide sound statistical data and I suggest you follow their blog at


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