Auction market in flux Chris Vedelago February 15, 2011
The clearance rate seems to be up, but it may be misleading.
Melbourne's auction market has posted a surprising improvement, with the clearance rate yesterday hitting 66 per cent.
The Real Estate Institute of Victoria based this performance on the results of 326 auctions, although the outcome of another 84 auctions ? or about 20 per cent of the total scheduled ? had not yet been reported to the group yesterday.
But, in a sign of what may be to come, last weekend's clearance rate was downgraded from 61 per cent to just 54 per cent after dozens of unreported results were chased down.
Advertisement: Story continues below
Auctions are getting busier and vendors are making more money than expected, while clearance rates have posted a surprising improvement. Photo: Craig Sillitoe But there's reason to believe the sales level could be even lower.
As the market has softened noticeably since late 2010, there's been a spike in the number of scheduled auctions that are being postponed and cancelled.
These properties are often pulled from the market by vendors when it becomes clear there is little interest from buyers. In some cases, the decision is made at auction time when no one shows up.
However, because no auction is staged, they are not recorded in the overall stock figures that are used to calculate the clearance rate.
For example, the REIV found that six auctions were postponed or cancelled last week, which, if they were included in the total stock level, would have made the clearance rate fall another 2 percentage points to 52 per cent. And that's just the number that were specifically identified.
To be fair, postponements and cancellations can occur for other reasons, such as problems with legal documentation or simply a change of heart on the part of vendors.
Nevertheless, the statistics point to a growing feature of the market that wasn't a factor in the much stronger conditions seen early last year. The voluntary reporting system used by the REIV ? which depends on agents disclosing the outcome of their auctions ? also means that a small but potentially significant number of results are never accounted for.
Last weekend the REIV said there were 203 auctions scheduled around the city. But the "revised" clearance rate of 54 per cent was still based on the results of only 182 auctions.
The remainder ? about 10 per cent of the total number scheduled ? were either postponed, cancelled, incorrectly listed or otherwise not reported, despite the REIV's attempt to collect them.
Considering that the auction clearance rate is so often cited as a barometer of buyer sentiment, the big question is, just how different the market would look if they were all included.
The margin of error could be small, but we don't really know.
Still, some argue that it's easy to belabour these points by focusing too much on the overall market and the clearance rate this early in the year.
"There are very healthy numbers of people looking through properties for sale," said Paul Nugent of Wakelin Property Advisory, citing open-for-inspections held in South Yarra, Prahran, Armadale, Malvern, Elwood and St Kilda. "But we won't really know what that translates to until we see some genuine numbers of auctions."
And conditions do seem better when looking just at specific pockets of the market. Bennison Mackinnon Armadale reported that all six of the properties it auctioned were sold ? five of them under the hammer.
The agency's standout result was 2 Baldwin Street in Armadale, a four-bedroom, double-fronted Victorian that attracted three bidders and sold for $1.36 million.It was quoted at $1.15 to $1.3 million and went on the market at the top of that range.
The Jellis Craig network reported 12 of the 15 properties it auctioned were sold under the hammer or through later negotiations.
In the west, Jas H Stephens said that open-for-inspection numbers were up 23 per cent on the same time last year.
The double-fronted weatherboard house the agency auctioned yesterday sold for $662,500 after it was passed in on a genuine offer of $640,000. The three-bedroom home at 54 River Street, Newport, which drew a crowd of more than 90 people, was quoted at $610,000 to $660,000.
Nearly 700 auctions are scheduled for next weekend. "[That is] when we actually see what is really going to happen this year," Mr Nugent said.
