What do Sydney's high clearance rates really mean?
Tue April 18, 2017
Anybody with an eye on the Sydney property market will be familiar with the region's high clearance rates over the last year or so. It seems there is an announcement every weekend of a new record being broken, or the city-wide rate taking another leap. But for somebody looking to buy or sell property, trying to work out whether this is good or bad for them, things can get a bit confusing. What do clearance rates actually mean? And more importantly, what can they tell us about the property market?
In the week ending March 27, more than 1,000 homes were auctioned in Sydney, with 81.1 per cent of these being sold.
Understanding clearance rates
Most people understand clearance rates as the percentage of homes sold at auction over a specific time period, usually a week. The exact formula used to determine clearance rates can differ depending on who is doing the research, but the most widely used information tends to come from CoreLogic RP Data, which publishes weekly updates on nationwide clearances.
The latest batch of information is unsurprisingly another jump. In the week ending March 27, more than 1,000 homes were auctioned in Sydney, with 81.1 per cent of these being sold either at the auction, before it, or afterwards (a record for Sydney in 2017). At the same time last year, clearance rates were slightly lower at 77.9 per cent. This might not be a big difference, but if you consider that over the same week last year only 349 auctions were held, it's clear to see that the volume of property changing hands has increased hugely.
This reveals the most important aspect of clearance rates - they take on meaning based on the market. Some cities don't have many auctions, so the clearance rate matters a lot less, whereas Sydney is currently seeing a lot of auctions, so high rates are definitely worth taking notice of.
What can we learn from clearance rates in Sydney?
So, if clearance rates are important to Sydney, what can we learn from them? The real value of clearance rate information is that it provides a so-called 'barometer' of the market, and whether the property climate is more beneficial to buyers or to sellers. Low rates give buyers more power, while higher rates are great news for those looking to sell a home.
With not enough properties on the market to satisfy buyer demand, it's very likely that most properties will sell, and sell quickly.
In Sydney, the high clearance rates are indicative of an issue that we've discussed a lot on this blog - a shortage of stock. With not enough properties on the market to satisfy buyer demand, it's very likely that most properties will sell, and sell quickly. This makes now a great time to sell, although it doesn't solve the issue of where you'll live once you've done so! New developments and investment in transport infrastructure should expand the number of properties available and bring the rate down slightly, but there's no real telling when this might begin to affect the market.
To make the best decision in terms of either buying or selling, clearance rates can be a valuable tool, but it's also worth seeking out any other relevant information. For example, clearance rates don't provide a clear idea of how many bidders were active in a particular auction, or where the property was sold in relation to its reserve or recent sales in the same area. For this information, it's well worth contacting an agent who understands your area. They'll be able to give you all the data you need to make an informed decision.
For more information, contact Laing+Simmons today.