Auction clearance rates are often used as an indication of the strength of the property market. However, it is a very skewed metric to follow and can actually be tailored by the Real Estate Agents to influence buyer’s decisions.
Consider this, when properties are flying out the door then Real Estate Agents will advise their clients to sell their property under the heat of an auction to get the top price. In any one suburb, there may be 10 properties listed for auction on a given weekend, and if 9 out of these 10 properties sell at auction this will provide a clearance rate of 90%. However, when the market is cooling the Real Estate Agents will tend to push their clients into negotiating the sale price for their property as they may get a better price through negotiating rather than under the hammer when auctions fall out of favour. In a low market, there may only be 3 properties in a given suburb going for auction over the weekend and if all of these 3 properties sell that is a 100% auction clearance rate however this higher clearance rate was only achieved by the Real Estate Agents listing less properties for auction. This is why auction clearance rates cannot be a determination of the trend for property prices or an indication as to the strength of the property market.
When in a property market cycle, the property prices pass their peak and enter the decline in the property clock, it’s actually the motivated sellers who are bringing property prices lower because they are feeling the pressure to sell by a deadline and so are becoming increasingly flexible with their price and selling terms. We are seeing many homeowners who aren’t desperate to sell right now taking a backseat approach as they “wait and see” what happens in the market with the plan to list their property in early 2023. This means we are expecting more supply to enter the market early next year.
It is now a great time to buy, as sellers are more willing to adjust their prices and they are being more realistic of their reserve prices and buyers are still hungry in the markets.
Buyers who currently have a pre-approval are preparing themselves to buy quickly when they find the right property because there is a risk that if there are more interest rate rises and they need to be re-assessed by the lender then they might not get such a great pre-approval and will need to re-assess the budget again.
It is important to remember that auctions are typically a selling tactic in the larger cities so is a metric that reflects the activities in the markets that move very quickly, like the Sydney property market. Regional cities and bridesmaid suburbs are often performing very differently to properties that are located in the capital cities due to the characteristics of these markets very different to the large capital cities. It is important to keep in mind that there are many property markets and they are all performing at different stages of the property clock. If you complete your due diligence and research thoroughly you may find some suburbs that are on the rise, and some suburbs that are hidden gems. If you are looking for an investment property, there are many suburbs that are seeing excellent returns at the moment, despite the media spruiking that property prices are plunging. When you look closely into the markets, the real story is quite different on the ground.
If you are unsure where to start to find a great investment property, it is always advisable to get an experienced buyer’s agent to assist you find your investment property that suits your individual needs.
If you are looking for a buyer’s agent to assist you with purchasing a home or investment property in the Sydney, Brisbane and Newcastle regions, as well as a Melbourne buyers advocate, please get in touch with Lloyd Edge and his team at Aus Property Professionals here or give us a call on 1800 146 837!
