If you've bought property at an auction before, or are looking to buy at an auction in the near future, you would have definitely heard the term “auction clearance rate”.
Auction clearance rate is a turn of phrase that gets bandied around a lot by industry analysts, avid property buyers and even the media.
In fact, a lot of media outlets will use auction clearance rate stats to highlight the perceived strength or weakness of the Australian property market.
But what are auction clearance rates and how important are they to you and your next property purchase?
In a nutshell, the term auction clearance rates refers to the percentage of properties that sold via auction on a particular day or weekend in comparison to the number of properties that were listed for auction.
For example, if 70 per cent of the properties listed for auction on a particular day sold under the hammer that day, then the auction clearance rate would be 70 per cent.
For home buyers and investors, auction clearance rates can be seen as a reflection of the market's volatility, as they provide information on the level of demand and supply in the auction market.
In other words, they are a key indicator of how the whole market is performing.
So regardless of whether you a first time buyer, refinancer or seasoned investor, auction clearance rates are a great tool that can be used to gauge market sentiment.
As a general rule of thumb, the higher the clearance rate, the better consumer sentiment is and the more demand there is for property.
How do they affect me?
For buyers, auction clearance rates will help you to determine whether or not there is a lot of demand for property in your desired area and whether or not this level of demand will affect your purchase price.
For sellers, you can determine whether or not there is enough confidence in the market to sell your property at your desired price.
But while auction clearance rates will provide you with an insight into market confidence, it is important to note that they are only a small piece of the ‘pie' of considerations.
Not only are clearance rates not area specific, (they provide an overview of the market as a whole), but less than 20% of all properties are sold via auction.
If you are looking to buy property in the near future, there is a high probability that you will do so through private treaty.
So, while it is a good idea to know what the average auction clearance rates are in your area, this should be used as a barometer only and should not be used to significantly influence your buying or selling decisions.
Your Mortgage Choice broker can help you investigate these other market factors and get you ready for auctions by securing preapproval!
Meet with a Mortgage Choice home loan expert today, or call us on 13 77 62
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