Auction Sellers In Submission

Results for week ending December 6

Over the past five weeks of sliding auction clearance rates, sellers have been tapping out in droves. In Sydney alone, more than 500 vendors cancelled their November auctions.

This trend is not the sellers’ friend. Buyers continue to gain the upper hand, as the combined capital cities rate has fallen further to 59.2 percent.

The Stats

After tumbling three points last week, Sydney’s clearance rate dropped again to 55.6 percent. Supply also fell to 1,051, further illustrating the growing weakness in the Sydney property market.

Melbourne slipped another three points to 63 percent, on volume of 1,603 auctions. That’s nearly 300 fewer sellers than last week, and 120 fewer than the same time last year.

Adelaide is showing the greatest resilience, with a preliminary clearance rate of 70.8 percent. Brisbane’s result was also lower than last week, at 46.6 percent. Perth had its busiest week of the year, yet demand remained steady.

The Graph

The Numbers

The Analysis

According to RP Data research, dwelling values declined last month in Melbourne and Sydney, 3.5 percent and 1.4 percent respectively.

Economics 101 says that when prices drop, supply will decrease, as fewer vendors are willing to sell at the lower price. This is beginning to unfold now in the property market.

When the market was hot, sellers were highly motivated to exit. But now, some vendors are deciding to bunker down rather than sell for less.

Such a strategy is perfectly sensible, unless there is a shock event that forces vendors to liquidate. If such an event does occur, then prices could fall sharply, rather than land softly, as many hope.

What It Means For Investors

What does all this mean? With supply diminishing, the falling auction clearance rates reveal that the actual number of buyers in the market is dropping significantly.

Expect properties to remain on the market longer as buyer FOMO (fear of missing out) wanes. Sellers therefore ought to readjust their sales expectations in respect to price, terms and sales method. If a good price is offered before auction, perhaps it should be taken.

This shifting sentiment is a welcome scenario for buyers. Investors looking for deals will command more and more power in negotiations, as sellers will fear that they may be mispricing the market.

With Christmas around the corner, most folks are now turning their attention to upcoming festivities. Real estate will take a back seat until the end of January, except perhaps for properties located in holiday markets.

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

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.