The auction clearance rate number has always been reported every week in the news and used to measure Australia's property market performance. During the current Sydney COVID lockdown period, it seems the lockdown didn't impact much of the property auction. The auction clearance rate during the Sydney COVID lockdown period is still relatively high, with 87% clearance rate (based on Realestate.com.au) and 73% clearance rate (based on Domain.com.au) for last week result (Mon 05 Jul 2021 - Sun 11 Jul 2021). This number is quite similar to the number before the lockdown period. This article will try to drill data for the auction clearance rate number to see if Sydney COVID lockdown impacts the property market.
What is the auction clearance rate?
The percentage of properties that successfully sold at or prior to an auction in a given week is known as the auction clearance rate. The clearance rate is calculated by dividing the number of properties sold through auction by the total number of auctions reported.
The formula for auction clearance rate will be:
(Sold at auction + sold prior to auction) / (Auctions reported) = Auction Clearance Rate %
The four weeks auction clearance rate data
For this exercise, all the four weeks data used are sources from Domain.com.au.
Saturday, 10 Jul 2021 (week 2 of Sydney COVID lockdown)
Clearance rate 73%
Auctions scheduled 787
Auctions reported 494 (note: unreported = 293)
Sold 361
Withdrawn 113
Passed in 20
Saturday, 3 Jul 2021 (week 1 of Sydney COVID lockdown)
Clearance rate 71%
Auctions scheduled 796
Auctions reported 560 (note: unreported = 236)
Sold 396
Withdrawn 138 (24.6%)
Passed in 26
Saturday, 26 Jun 2021 (start of lockdown from 05:00pm)
Clearance rate75%
Auctions scheduled 961
Auctions reported 863 (note: unreported = 98)
Sold 650
Withdrawn 120 (13.9%)
Passed in 93
Saturday, 19 Jun, 2021
Clearance rate77%
Auctions scheduled 1037
Auctions reported 762 (note: unreported = 275)
Sold 589
Withdrawn 96 (12.5%)
Passed in 77
The auction scheduled number
The data above showed that the number of auctions scheduled had been decreased since Sydney COVID lockdown announcement. The scheduled auction before lockdown was 1037 on 19 Jun, 961 on 26 Jun and since lockdown was announced has changed to 796 on 3 Jul and 787 on 10 Jul. There is a decrease of 165 to 250 auctions per week.
Unreported Auction number
The result for last week on Saturday 10 Jul 2021, there were 787 auctions scheduled but only 494 were reported. This means there were 293 auctions unreported, which is 37.2% of 787 scheduled auctions. If you calculated the percentage of auctions not reported in these four weeks, a pattern emerges:
Saturday, 10 Jul 2021, unreported = 293 which is 37.2% of 787
Saturday, 3 Jul 2021, unreported = 236 which is 29.6% of 796
Saturday, 26 Jun 2021, unreported = 98 which is 10.1% of 961
Saturday, 19 Jun 2021, unreported = 275 which is 26.5% of 961
These numbers indicate thatsince the Sydney COVID lockdown there is an increase number of unreported auctions (from 26.5% and 10.1% to 29.6% and 37.2%)
The newly adjusted auction clearance rate
The main reason for the unreported auction is because the selling agents did not report to Domain.com.au how their property auction went. In most instances, this indicated that the auction didn't go well or was passed in. So, if we use last week number of 293 unreported auctions and assume 50% of them were sold, it means 147 properties were sold (293 / 2 = 146.5, rounded up to 147).
The total properties sold by auction become: 147 + 361 (reported sold that week) = 508
The new auction reported number will be the same number as the auction scheduled number = 787
The newly adjusted auction clearance rate number will be:
(Sold at auction + sold prior to auction = 508) / (Auctions reported = 787) = Newly Adjusted Auction Clearance Rate = 64.5 %.
This assumption gives a lower clearance rate of 64.5% compared with the initial 73%. In reality, the percentage of auctions not reported by the agents because the properties have been passed in will mostly higher than 50%, which results in an even lower auction clearance rate number.
The withdrawn number
The withdrawn number refers to properties that supposed to go to auction but do not proceed. Most properties that were withdrawn for auction normally changed to private treaty selling methods. The data above pointed that the number of auctions withdrawn had been increased since the lockdown announcement. The withdrawn auction number was 96 (12.5%) on 19 Jun, 120 (13.9%) on 26 Jun to 138 (24.6%) on 3 Jul and 113 (22.8%) on 10 Jul. There is an increase of 8.9% to 12.1% of auctions reported been withdrawn per week.
In Summary
Although the auction clearance rate number has been stable during the Sydney COVID lockdown period, around 70%, we should not take the auction clearance rate number at face value. These are few things that the data showed happened during the lockdown:
There is a decrease of 165 to 250 number of auctions scheduled per week.
There is an increase in unreported auctions, from 26.5% and 10.1% to 29.6% and 37.2%.
Using last week auction clearance rate of 73% and assumes that there is 50% sold properties on unreported auction, this will give a lower adjusted clearance rate number of 64.5% compared with 73%. The percentage of auctions not reported by the agents will most likely higher than 50%, which results in an even lower auction clearance rate.
There is an increase of 8.9% to 12.1% number of auctions been withdrawn per week.
If you want to understand the property market in your local area, feel free to contact Irving at 0468 956 677 or book your free real estate consultation.