Auction clearance rates continue to fall amid weak market

Auction clearance rates have been dismal at late, and today is no exception. Figures from the REIV show a preliminary Auction clearance rate for Melbourne of 65 percent from the 773 auctions held today. The same weekend last year had a clearance rate of 87 percent.

Clearance Rates from Long Weekends have been removed

The auction clearance rate has been trending down over the past months as confidence evaporates from the market and investors head for the exit. Last weekend, there was 942 auctions, a record for this time of the year.

Auction clearance rates have been a favoured statistic among property speculators and is used to demonstrate the health of the market. While some statistics take months to propagate through the market and be reported, Auction clearance rates are known on the day it happens.

Matthew Bell, a Senior Economist at Australian Property Monitors says there is an extraordinarily strong relationship between prices and auction clearance rates. This would suggest, prices are due to fall, if they have not already. Median prices is just one statistic that can take months before their results are known.

There is also a strong relationship between finance approvals (people generally need to borrow to purchase a property, be it to live in or as an investment) and house prices. We have also seen consecutive month to month falls in finance approvals, hence most data at the moment is pointing to house prices falling in value in the second half of this year.

» Weekly Auction & Sales Results, Market Overview – Real Estate Institute of Victoria, 26th June 2010.

» In defence of Auction Clearance Rates – Business Day (FairFax), 26th June 2010.


  1. Supply is slowly beginning to exceed demand. The question is why are so many people starting to sell their property? Is it due to financial stress? Is it ‘getting out at the top’ mentality? I don’t know the answer but it is clearly the game is changing rapidly.

  2. I think people are just realising there is no room for upswing. All debt is tapped out.

  3. There is no “housing shortage”. The number of people per household has been falling for over 40 years.

    “The average number of people per household in Australia in 1971 was 3.31, in 2006 this number has decreased to 2.6.”

    Any salesman who want to rip you off presents the illusion that there is a “shortage”.

    Take oil companies, they try to convince people that oil is running out and there is a “short supply” so that they can rip off people.

    Property salesman try to convince people there is a “shortage” of houses so they can rip you off.

  4. I don’t see how this is going to get any better. There are no new entrants (buyers) into the market as getting a loan from the banks is becomming really difficult (I know this as a 1st time home buyer who is trying to buy a 2 bedroom unit!) and the banks want at least $100k deposit.
    As a profesisonal in a good job who has been saving hard for the past 5 years, not many of my friends can afford deposits like this either and the repayments are unsustainable on the current salaries.
    So if there is no new demand I think prices will start to decrease unless investors keep buying up all the property, but even then banks now want 20% deposit from investors who already have portolfios.
    A few more interest rate rises from RBA should push things over the edge as rentals will not cover recently purchased property repayments.
    With US hedge funds betting against the Australian house market, I am seriously considering keeping my savings in the bank and waiting for another 6 months to see what happens.

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