Ex­pert: Auc­tion clear­ance rates ex­plained

Whitsunday Times - - REAL ESTATE -

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THE much-re­ported auc­tion clear­ance rates are often taken as an in­di­ca­tion of the health, or lack thereof, of the prop­erty market, with many (in­cor­rectly) as­sum­ing that a low auc­tion clear­ance rate in­di­cates a weak market and a high clear­ance rate means the market is gal­lop­ing away. Firstly, what is an auc­tion clear­ance rate? Well, it’s a num­ber that in­di­cates how many prop­er­ties were suc­cess­fully sold at auc­tion, ex­pressed as a per­cent­age of the whole.

So for ex­am­ple, 60 per cent means that six out of ev­ery 10 auc­tions sold un­der the ham­mer, or just prior to auc­tion or just af­ter auc­tion, and four did not sell. Those four were ei­ther passed in or with­drawn from sale.

A com­mon crit­i­cism of the auc­tion clear­ance rates as a mea­sure­ment is that it’s not sci­en­tific and the method of cal­cu­la­tion varies be­tween each re­port­ing agency.

Usu­ally, it’s col­lected by phone banks – hundreds of peo­ple call the real es­tate agents ev­ery Satur­day af­ter­noon and Sun­day morn­ing and ask them how many of their auc­tions sold un­der the ham­mer and how many were passed in.

Or it’s col­lected by self-re­port­ing, with agents and auc­tion­eers email­ing the data col­lec­tors what their auc­tion re­sults were for the week­end.

Nat­u­rally, some­times an auc­tion­eer doesn’t al­ways want to re­veal that they had four auc­tions fail to sell be­cause they may feel it is a re­flec­tion of their auc­tion­eer­ing skills.

And some­times if an agent doesn’t have enough regis­tered bid­ders for an auc­tion, they may ad­vise the ven­dor to with­draw the prop­erty from auc­tion.

De­pend­ing on the re­port­ing agency, this may not get re­ported and so may re­sult in an in­ac­cu­rate re­flec­tion of the auc­tion market.

Some­times the me­dia may re­port on a high auc­tion rate and de­clare that the market is steam­ing ahead. But what is a high clear­ance rate? Is it 60 per cent? Sev­enty per cent? And where does the thresh­old for ‘low’ be­gin? Is it 50 per cent? 40 per cent?

It ac­tu­ally varies from market to market. To re­ally un­der­stand auc­tion clear­ance rates, it is im­por­tant to un­der­stand the market you’re con­sid­er­ing buy­ing in.

What are the long-term av­er­age clear­ance rates for that market? That’s the only way to know whether the market is go­ing up, go­ing down or hold­ing steady.

The im­por­tant thing to re­mem­ber when look­ing at auc­tion clear­ance rates is that this is just one met­ric used to mea­sure the market and in Bris­bane (and Queens­land-wide) it is sim­ply not as pop­u­lar as it is in the south­ern states.

Queens­lan­ders have long pre­ferred to buy by pri­vate treaty and that his­tor­i­cal pref­er­ence is a big part of our smaller auc­tion market.

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