How did Victoria manage a 92% clearance rate on Saturday and a 97% clearance rate the weekend before, in the midst of a lockdown?
Sure the market is strong at the moment, but 97% seems to good to be true… And it is.
Clearance rates can be misleading at the best of times, let alone during a lockdown, which imposes an artificial bottleneck on the property market.
In any case, what does the clearance rate actually tell us? And perhaps more importantly, what doesn’t it tell us?
Firstly, the reporting varies greatly across the different sources.
For the weekend just gone REA shows 92% clearance for Victoria with just 196 reported auctions: 178 sold, only one withdrawn and 15 having passed in.
Domain, meanwhile, shows a far lower 63% clearance rate for the same weekend but for Melbourne only, with 257 auctions reported: 163 sold, 70 withdrawn and 24 having passed in.
REIV reported a 91% clearance rate for Victoria from 271 auctions.
So which is it? And why the discrepancy?
Each of these sources report their clearance rates differently.
For the REIV, ‘sold’ properties include those which sold before auction, at auction, or after auction on the Saturday or Sunday only.
REA and Domain seem to update their clearance rate throughout the following week to include those which sold on Monday, Tuesday, etc.
Domain include withdrawn properties as part of the clearance rate.
The REIV and REA only count auctions that went ahead – not auctions that were withdrawn or rescheduled.
And this is perhaps the most misleading part of the clearance rate – any property that is withdrawn, rescheduled or converted to private sale is excluded from the clearance rate.
What is the main reason that a property would be withdrawn, postponed or converted to private sale? Lack of interest.
These are the properties that were struggling and would have most likely passed in, dragging the clearance rate down.
That is to say, the clearance rate always under-reports properties with limited interest as they often don’t make it to auction.
When the lockdown was announced agents and vendors had to make a call – if they had a buyer or multiple buyers they either wrapped up the sale before auction or proceeded to Zoom auction (only if they were supremely confident it would sell).
All of these successful sales count in the clearance rate.
If, however, they didn’t have a standout buyer or interest was a bit soft then the lockdown was the perfect excuse to push out the campaign or even convert to private sale.
So none of these slower campaigns counted in the clearance rates.
Hence, 97% clearance on the 4th June and 92% this weekend.
The final thing worth noting around clearance rates is that volume matters. 196 auctions is a very small sample size and therefore not necessarily a true reflection of the broader market. A busy auction weekend in Melbourne is well over 1000 auctions.
Ultimately, the clearance rate is an imperfect measure and its reporting is inconsistent, so it can be somewhat misleading if taken at face value.
But if you are aware of its shortcomings it can still be an important tool – particularly when looking at trends over time.
97% is absurd. But no doubt the clearance rates will continue to trend in the 80s for the coming months, as they have done all year, which in an historical perspective can only be interpreted in one way… Strong.
Feature image: 6 Medley Street, South Yarra (Lande Architects)