Auction Stats Reveal Spike in Melbourne Buying Activity

Results for week ending August 28.

The number of auctions held across the capital cities this week increased to 2,113, and the preliminary clearance rate notched up to 76.6 percent. A higher number of listings is normal in the lead up to the spring months, but volume remains low compared to the same time last year, when 2,654 auctions were held. Last week’s final results showed 75.2 percent of 1,795 auctions clearing successfully.

The Stats

Sydney’s clearance rate remains strong in the 80s, but fell over three basis points to 81.0 percent. Last week’s final result of 84.3 percent was the city’s record for the year so far. Volume ticked up to 762 auctions, compared to 687 last week and 1,106 over the same weekend last year.

Melbourne buyers picked up Sydney’s slack this week, with a preliminary clearance rate of 79.0 percent. Last week’s final result was 75.4 percent. Melbourne’s strength is especially pronounced given the increase in volume from 789 last week to 1,046 this week. Nonetheless, seller activity remains subdued compared to one year ago, when 1,188 homes were auctioned.

The Graph

The Preliminary Numbers

The Analysis

In previous weeks, clearance rates were high because the number of properties listed was exceptionally low. That remains the case to some degree in Sydney, but Melbourne saw a significant boost in demand this week relative to supply.

Sydney’s volume increased, but the clearance rate decreased. Looking deeper at the maths, last week there were 579 successful bidders, compared to 617 this week. There were not nearly enough new buyers to absorb the additional supply, so the clearance rate fell.

In Melbourne, volume increased a lot, but so did the clearance rate. Again, diving into the numbers, last week there were 595 successful bidders, compared to 826 this week. That’s 231 more buyers, or an increase of nearly 40 percent from last week!

As you can see in CoreLogic’s graph above, auction clearance rates are now trending up with authority. Expect the combined capital city clearance rate to be higher again next week, especially considering there is a lower level of supply expected for the coming weekend.

What It Means For Investors

After the recent RBA rate cut and without any word yet from APRA about tightening bank capital requirements, the availability of cheap credit is driving demand for real estate higher. In the near term, expect Melbourne and Sydney to remain very competitive markets for buyers. If you’re hunting for a renovation or subdivision deal, expect a battle to sign a contract that delivers your profit margin.

If you’re a seller, enjoy the party while it lasts.

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.