Winter Is For Calendars

Date: 26/05/2015

Results for week ending May 24

Melbourne has joined Sydney in the 80% club for auction clearance rates this weekend pushing the national average to 78.4%.

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

Auction Clearance Rates
Week Ending 24/05/15	Clearance Rate	Auctions
Sydney	86.9%	950
Melbourne	80.0%	1110
Brisbane	51.2%	155
Adelaide	72.3%	87
Perth	25.0%	53
Tasmania	20.0%	15
Canberra	65.2%	100
Source – Corelogic RPData

The Analysis

Winter is in our midst but for now it seems just a point of time on our calendars! It’s fair to say there is still no sign of the market hibernating in either Sydney or Melbourne. Another auction clearance rate well above 85% for Sydney really hammers home the point.

So does their southern neighbour’s result. Melbourne also broke the 80% threshold in another strong performance for that city. Clearances were strongest in the east with results of up to 94% in Knox. Some analysts think that Melbourne will hold strong through the winter period. And it seems reasonable to think so if supply does dry up because demand may well continue to be underpinned by the ongoing low interest rates.

What it means for investors

Artificially low interest rates do bring distortions to the market (if you’ve ever wondered how the RBA weaves their magic here is a good summary). And I can’t help but think it has provided a boon for Lend Lease on the weekend. Their Darling Square project in Sydney sold out 581 apartments (for $600 million dollars) in less than 5 hours. It was certainly a popular choice! But I just wonder how worthwhile purchasing in such a project will be. It’s hard for me to see how returns and growth are best found there when competing against 1499 similar apartments in the same location. So, as always, we need to take stock of where and what we buy as an investment.

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.