Auction Market Finishes 2016 Strong

Auction Results for week ending December 18, 2016.

The combined capital city clearance rate fell slightly to 70.5 percent this week and auction activity eased nationwide, while results for Sydney and Melbourne remained strong, in the mid-70’s.

The total number of auctions reported fell to 2,722, down from 3,432 last week. Although that’s a significant drop from last week’s nearly record-breaking high, the auction market remains much more active compared to the final weekend of 2015. Last year at this time, only 1,818 auctions were held, and the clearance rate was 59.4 percent.

The City Stats

In Melbourne, 1,286 homes were taken to auction, down from last week’s surge to 1,685. The preliminary clearance rate fell a few points from 78.4 percent last week to 75.7 percent this week. Over the corresponding weekend last year, 875 auctions were reported with a clearance rate of 65.7 percent.

The preliminary clearance rate increased in Sydney, up to 74.1 percent from 73.7 percent last week. Auction volume was down to 874, from 1,168 the previous week. One year ago in Sydney, 61.2 percent of 456 auctions were successful.

The Graph

The Preliminary Numbers

The Analysis

With Melbourne and Sydney clearance rates finishing the year in the mid-70s, we can assume that many hopeful buyers left auctions over the weekend having been outbid by someone with deeper pockets. This would indicate that there is plenty of demand still in the pipeline ready to resume bidding in February. Early 2017 may look similar to early 2015 when auction clearance rates shot up to the mid-to-high-70s by the end of February. If supply is weak, clearance rates could push even higher.

Here’s the chart from Core Logic showing the auction volume and clearance rate results for the past five years:

Year-on-year auction volume has been on the decline for the last three years, as you can see in the chart above that 2015 and 2016 achieved lower highs (grey bars). If that trend continues, weak supply together with strong east coast demand may keep prices rising for a little longer. At some point, either next year or the year after, Aussies will max out on debt, supply will exceed demand, and growth will stop.

What It Means For Investors

Manufactured growth investors hoping to secure renovation or subdivision deals in the New Year will continue to face competition from lifestyle buyers and speculative buy and hold investors. You may find it helpful to follow Matt Jone’s advice for finding great deals in hot markets.

Demand in 2017 will continue to depend primarily on the availability of cheap credit. For commentary on what 2017 may hold for interest rates, check out Alistair Perry’s most recent post.

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The results listed here are based on preliminary reporting by CoreLogic.

For the historical data of weekly auction clearance rates, click here.

Auction clearance rate results posting will continue in the New Year, once the market regains steam.

By Jason Staggers

Jason was a personal mentor working with Steve McKnight's Property Apprentices. He helped hundreds of investors apply Steve's teachings in the real world and achieve greater results on their journey to financial freedom. Jason now lives in Perth, WA where he leads Neuma Church.