In a shocking revelation, National Auction clearance rates drop below 50%, apparently the worst rates since the market correction in 2018. At that time, buyers borrowing capacity was slashed during the inquiry into the banks and lenders (‘2019 banks inquiry’ Financial services Royal commission) and the Labor Government was running into a 2019 election on the promise of scrapping Negative gearing, Capital gains TAX and stamp duty changes. This policy caused a lot of concern to buyers at the time.
The market downturn – in Sydney – lasted most of 2018 and 2019.
Sydney Auction clearance rates have also been hit in the second quarter of the year with not much changing since, sitting at around 50%, meaning 2026 is following a similar trend, for now.
Auction clearance rates are a good way to determine market sentiment; however, not all data should be consumed equally. Clearance rates are only determined by the properties that GO TO auction, obviously, but do not take into consideration that which has sold prior or been withdrawn; a bugbear of mine.
Yes, sentiment has shifted in the Australian market and – my focus – the Sydney market, however, please do not use this as the key indicator for market conditions there are many variables.
Owners: When a property goes to auction, if the owners are aligned with the market feedback, the pre-auction offers and recent comparable sales and the agent has been influencing buyers with the same information, the auction, while difficult, should be a success.
Withdrawn: Properties can be withdrawn, on the day but represented as going ahead but passing in. This trend has increased with agent’s hopeful all the way up to the day of the auction, praying buyers come with no effort outside of the online advertising to obtain them.
Sold prior: Often properties sell before the auction, this may not be represented in the data often, most agents do not respond to requests for information from the multiple data agencies; we have to pay a subscription fee to access their data but they rely on us to provide this data to them for free and most agents, including me, do not reply.
Buyers: The biggest variable now is buyer intent; concerns with macro-economics, national politics, global geopolitics and the state of the property market economics are of primary concern. Buyers can usually buffer against 1 or 2 variables, but these things combined with High interest rates – compared to recent history – and high inflation make it difficult to enhance the buyer experience. But this is our job, right?
Cancelling an auction, ‘Auction if not sold prior’ and other floppy sentiments are not going to enhance the buyer experience, the seller’s chances or the market sentiment.
Once we are at ‘the bottom’ of the market, clearance rates will increase, but not necessarily prices. Sellers will too be buying. Clearance rates will climb before prices, usually there will be a dip in Auction clearance rates at the top of the market too, when most things sell prior and only overpriced listings make it to auction, passing in with lofty price expectations.
However, this will be the first changing market where agents face $110,000 fines for underquoting, so perhaps this will hit clearance rates with nervous agents opting for other quoting styles or private treaty campaigns.
Eventually, all of these things will hit every Aussie on either side of the transaction in the housing market.
Thomas Merriman 