This week was set to be the busiest week of the year with 3,203 homes scheduled for auction across the combined capital cities. With the disruption of new policies preventing on-site auctions, the auction withdrawal rate surged over the weekend, with 40 per cent of auctions pulled from the market, up from 7.5 per cent a week earlier. The high rate of withdrawals weighed on the preliminary clearance rate, which dropped to 51.4 per cent; the lowest reading since June 2019. Over the previous week, the final clearance rate came in at 56.9 per cent across 2,599 auctions, while this time last year saw a 50.9 per cent success rate across 2,164 auctions.
The surge in withdrawn auctions was anticipated, considering the rising level of uncertainty from both buyers and sellers, coupled with the shift towards remote auctions which may take some time for the market to adjust to. Considering the rapid transition to on-line auction formats, some agents reported technical challenges and connectivity issues; no doubt many of these challenges will be resolved with the benefit of more time to prepare.
Additionally, the number of auction results collected are lower than usual this week as we seek to confirm the status of scheduled auctions, however, as remaining results are collected we expect the number of withdrawn auctions to rise and the final clearance rate to adjust lower.
We also saw a surge in the proportion of properties sold prior to auction, lifting from 22 per cent of the preliminary collection last week to 36 per cent this week. There are likely to be a range of reasons for more auctions selling prior to the scheduled date, including auctions that were brought forward to beat the ban and vendors motivated to offload their property before lock down policies potentially escalate.
In Melbourne, a preliminary auction clearance rate of 58.6 per cent was recorded across 1,517 auctions this week, while last week there were 1,343 auctions returning a final clearance rate of 58.4 per cent. One year ago, the clearance rate was 52.1 per cent across 978 auctions. The preliminary numbers show 32 per cent of Melbourne auctions were withdrawn from the market.
There were 1,263 auctions scheduled in Sydney this week, of which 385 (45%) have been confirmed as withdrawn so far, returning a preliminary clearance rate of 47.3 per cent. In comparison, there were 946 auctions held over the previous week and the final auction clearance rate was 58.8 per cent. One year ago, 801 auctions were held and the clearance rate came in at 54.3 per cent.
Looking forward, the coming months are likely to see substantially fewer auctions than normal. Some vendors will choose to convert their listing to a private treaty method, while others will likely pull their property from the market all together until confidence and selling conditions improve. The auctions that proceed will likely utilise digital platforms such as Gavl or AuctionNow as well as proprietary platforms from the major real estate groups.
While the preliminary result this week is not overly surprising given the restrictions were only just announced on Tuesday banning in-room and on-site auctions, once agents have time to adjust it will be interesting to see whether methods such as online or over the phone solutions can become a successful replacement whilst the social restrictions are in place. Overall, we are expecting a substantial drop in new property listings, regardless of the selling method, as buyers and sellers retreat to the sidelines and wait for some certainty to return to their decision making.
Written by Caitlin Fono – CoreLogic – 30 March 2020