Auctions clearance rates consistently beat private treaty: Dan White

EXPERT OBSERVATION

Despite the recent easing, auction clearance rates are actually consistent with long term averages and still outweigh the private treaty sales clearance on any given day.

I'm concerned the consistent negative commentary on auction clearance rates could lead to fewer vendors supporting the proven method of sales success.

This negative commentary is not supported by empirical research, not compared with other sale methods or, apart from the auction clearance rate, never supported by underlying auction metrics.

Just as the market sets the property value, the market should also choose the appropriate sale method and not be turned off by this negative commentary.

Some analysts had formed the view that auctions don’t work in today’s market using only the "one dimensional auction clearance" numbers reported by the data providers.  

The auction day clearance rate is only one part of the equation. In reality, you are three times more likely to get a sale by auction than by private treaty on any given Saturday in some cities.

Ray White sells one in every 10 houses in Australia, including more houses in every single price bracket than any other agency group - from affordable stock to harbourfront luxury.

The group also sells more property via the auction method, being the listing agent for one in four auction properties across Australasia.

As the largest auction house we do not look at clearance rates in isolation, metrics such as properties withdrawn from auction and the market, properties sold prior to auction day, properties sold post auction day are all factored in.

Passed In status (ie highest bid), registered and active bidders, number of bids per property and crowd sizes are essential to understanding why auctions are a crucial method of sale and achieve exceptional results.

Data providers and analysts do not have the capability to collect these underlying metrics to form a holistic view.

Added to this once the Saturday auction and news cycle is completed data providers do not take into consideration properties sold post auction which are still under auction conditions.

Many of the group's most successful auction businesses also only auction mid-week and not on Saturdays at all. Many of these large offices regularly clear 70 - 80 per cent of their stock on a Thursday night and will therefore not be counted by the portals on the weekend. 

Our auction data is robust, rich and importantly complete, and shows us a lot more about buyer sentiment and market conditions than what the third party data collectors announce each Saturday afternoon.

While analysts are quick to give their opinions on such limited data, perhaps to meet the demands of the news cycle, it’s unclear on what basis they form extrapolated market views.

More concerning is when large institutions, including the Reserve Bank, quote this one dimensional data when explaining interest rate settings. Added to this concern is, data providers collect auction results via antiquated manual collection methods and can be inflated or understated depending on those who choose to respond and response rates. Many choose not to report to third party data providers.

While the market has softened, persistent commentary regarding auction results is largely unhelpful to both sellers and buyers based on such thin, unsubstantiated data.

In addition to commentators passing judgement on auctions based solely on clearance rate, auction naysayers forget the benefits auctions provide to sellers and buyers being, transparency, timely, immediate feedback, committed buyers and sellers and ultimately an immediate understanding regarding the market value.

Certainly there has been a reduction in auction day clearance rates compared to 2017 and early 2018 but auction results are in line with long-term trends despite the negative publicity.

Even more importantly, transaction rates at 30, 60 and 90 days for properties marketed under the auction method over the past three months have jumped significantly in all regions in comparison to those marketed any other way.

For example, in Sydney over the past 90 days, the Ray White auction clearance rate at 30 days is 48.1 per cent, while the private treaty sale rate is just 16.5 per cent.

In Melbourne, the Ray White auction clearance rate at 30 days is currently 46 per cent, while the private treaty sale rate is just 20 per cent.

This data is consistent across our residential, commercial and rural property.

Market conditions will always fluctuate but the best outcomes for homeowners looking to sell are created by agents maximising competition through auction campaigns.

This is just as true and relevant today as it was when the man himself, Ray White, started auctioning in 1902. And that will never change.

DAN WHITE (pictured in title) is the Managing Director of the Ray White Group