Bubble Bubble Toil And Trouble?

Results for week ending 12 April 2015

Sydney and Melbourne have picked up where they left off before Easter. Sydney is still pushing record high clearance rates.

The Stat

Auction clearance rates report the number of properties sold compared to the number of properties offered up for auction. A figure of 80% and above indicates a strong performance. The real estate industry aims for 70%.

The Graph

The Numbers

Source – Corelogic RPData

The Analysis

The auction treadmill may have skipped a weekend but it hasn’t skipped a beat. We can see that Sydney and Melbourne continue with their high clearance rates and that the remaining cities are clearing stock at a consistent rate too. A key feature to be aware of is that the volume of auctions have reduced by half or more in most cases. This means there would need to be a dramatic drop off in buyers to see a lowering in the clearance rates. The data shows this hasn’t occurred.

What It Means For Investors

Clearance rates have tended to soften for the post Easter Weekend in the past. But clearly we can see that Sydney and Melbourne are firing forward at a rate of knots. This ongoing strength in the market is keeping some people stumped with one commentator likening the weekend’s events to a trip to the dentist ie. ‘it hurts and it will cost you’!

I have commented here how I think the current market activity is consistent with strong market fundamentals. I don’t think this has changed. But I also think the market is being driven by historically low interest rates enticing buyers in. With prices jumping quite significantly in Melbourne and Sydney people need to remember to maintain manageable levels of debt when making purchases.

By Andrew Stow

Andrew undertakes residential property developments and has been a moderator for propertyinvesting.com for five years. Andrew’s business background is in outsourced customer service where he was a statistical analyst and workforce planner servicing programmes for top 100 companies.