Vendors drive a spike in clearance rates

Article courtesy of The team at Jason Andrew – 12 May 2014

According to the latest finalised data, last week saw the national auction clearance rate spike to 64%, the highest sale rate recorded over recent weeks. But interestingly, the cause did not appear to be due to a rush of new buyer activity or even a lack of supply – broadly, the main driver appeared to be a moderation in vendor reserve prices, which encouraged those buyers currently in the market to act.

Last week brought the positive news that the official cash rate would remain on hold for at least another month. Meanwhile, employment data showed a higher than expected number of new jobs, leading many commentators to bring forward their expectations for a rate rise. But looming over the macro picture and causing significant concern last week was the Federal budget, due tomorrow. The drop in sentiment is not just anecdotal – the latest Roy Morgan consumer sentiment survey showed a drop of 8% in confidence over the past fortnight.

In the property market, a noticeable decline in buyer activity has been recorded over the past few weeks, with the average number of bidder registrations in many areas below the levels recorded late last year and early this year. Last week, while registrations remained lower, 79% of those who were registered made at least one bid – a significantly higher percentage than that recorded through the year. Correspondingly, the percentage vendors were required to shift their expectations in order to secure a sale under the hammer also fell to less than one percent.

The picture presented by this data is straightforward; despite limited buyer activity, those buyers in the market did see value at the vendor’s reserve in many cases, leading to a higher than usual clearance rate. While averages give perception as to market trends, the result on any given day for any given property will always come down to this equation – wherever there is a perception of value, buyers will compete.

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