Despite the recent easing, auction clearance rates are actually consistent with long-term averages, according to one of Australasia’s leading property groups, and still outweigh the performance of private treaty sales.
The Ray White Group said that the consistent negative commentary on auction clearance rates could lead to fewer vendors supporting the “proven method” of sales success.
Managing director Dan White said that the commentary is not supported by empirical research nor is it compared with other sale methods and, apart from the auction clearance rate, never supported by underlying auction metrics.
“Just as the market sets the property value, the market should also choose the appropriate sale method and not be turned off by this negative commentary.”
Mr White said that some analysts had formed the view that auctions don’t work in today’s market using only the one-dimensional auction clearance numbers reported by the data providers.
“The auction day clearance rate is only one part of the equation. In reality, you are three times more likely to get a sale by auction than by private treaty on any given Saturday in some cities,” he said.
Mr White said that the Ray White network sells one in every 10 houses in Australia, including more houses in every single price bracket than any other agency group.
He said that the group also sells more property via the auction method, being the listing agent for one in four auction properties across Australasia.
“As the largest auction house, we do not look at clearance rates in isolation,” Mr White said.
“Metrics such as properties withdrawn from auction and the market, properties sold prior to auction day, properties sold post auction day are all factored in. Passed-in status, registered and active bidders, number of bids per property and crowd sizes are essential to understanding why auctions are a crucial method of sale and achieve exceptional results.”
Mr White said that data providers and analysts do not have the capability to collect these underlying metrics to form a holistic view.
“Added to this, once the Saturday auction and news cycle is completed, data providers do not take into consideration properties sold post auction which are still under auction conditions.
“Many of the group’s most successful auction businesses also only auction mid-week and not on Saturdays at all.”
Mr White said that many of these large offices regularly clear 70 to 80 per cent of their stock on a Thursday night, and will therefore not be counted by the portals on the weekend.
“Our auction data is robust, rich and importantly complete, and shows us a lot more about buyer sentiment and market conditions than what the third-party data collectors announce each Saturday afternoon,” he said.
“While analysts are quick to give their opinions on such limited data, it’s unclear on what basis they form extrapolated market views. More concerning is when large institutions, including the Reserve Bank, quote this one-dimensional data when explaining interest rate settings.”
Mr White acknowledges that there has been a reduction in auction day clearance rates compared to 2017 and early 2018, but he says current auction results are in line with long-term trends.
“Even more importantly, transaction rates at 30, 60 and 90 days for properties marketed under the auction method over the past three months have jumped significantly in all regions in comparison to those marketed any other way.
“Market conditions will always fluctuate, but the best outcomes for home owners looking to sell are created by agents maximising competition through auction campaigns. This is just as true and relevant today as it was when Ray White himself started auctioning in 1902.”