Finally signs of the old supply and demand adage amid December auction results

The second last weekend of the spring/summer auction season secured a weakened, yet satisfactory, 76% success rate across Sydney and 72% in Melbourne, according to the preliminary results from Australian Property Monitors.

Finally signs of the old supply and demand adage.

A little real estate logic which was very late arriving in Sydney - and only under the weight of the burden of eleventh hour 800-plus weekend volumes of early December.

The herd mentality had kept the preliminary clearance rate figure above 80% for almost all of Sydney's spring.

Melbourne did very well, but never quite reached that same momentum, and wilted first too.

No doubt the emphasis on the headline auction success rate was a contributing factor that triggered many lucky vendors to list - along with the accompanying buyer urgency - and they did so on the back of the Sunday and Monday newspaper auction coverage which comes with its preliminary initial result figures.

Once the bulk of the unpublished results come in mid-week, invariably the result is weaker typically because tardy agents who don't get a Saturday sale often try to hold off notification until they do. 

So for instance the Saturday December 7 results had the preliminary figure at 78% for Sydney, but revised down to 74% - and there are still 75 results missing from the 830 scheduled auctions.

Similiarly for Melbourne, an initial 66% but a revised 64% with 110 results still missing from the 1314 scheduled auctions.

Always the same pattern towards a slightly lower result, which doesn't get enough attention in the aftermath given the media's need for quick timely news and its avoidance of the stale.

These near-final results are certainly available from the property data suppliers, but mostly ignored by the mainstream media.

Industry participants and auction fanantics watch and know the trend, but the Saturday night headline is what Joe public gets.

There's been a recent debate sparked on the matter in the Australian Financial Review with numerous articles written by Mark Bayley, a credit strategist at Aquasia, an independent corporate advisory partnership, under headlines including 'Lies, damned lies'; 'Auction clearance rates'; 'Misleading property auction figures "put buyers at risk"'; and '1,438 auctions missing: Sydney’s Impossible Property Search'. 

Bayley's contention is that this initial reported rate fails to tell the actual situation in the weekend property markets. He's right because of the 995 scheduled Sydney auctions, only 669 were reported.

But then Bayley ill-advisedly suggests the 509 sales should be calculated using the 995 number to conclude "Sydney’s real auction clearance rate was 51.2%."

Bayley maintains the data collection methods were open to systematic abuse and the published auction clearance rates had the potential to vastly overstate the health of the market. He's even had the support of the ABC's so-called Fact Check unit which says his conclusion that auction clearance rates aren't "transparent, real or representative of what happens at auctions on any given day" checks out.

Sure even the updated tally is never 100% of all scheduled auction results, but I am not one for conspiracy theories - and anyway for mine the bigger issue is withheld prices after public auctions. That's the most important issue of public market knowledge, rather than the overall tally.

And I would also suggest Bayley's preferred calculation method would vastly understate the health and wealth of the auction market.

I started the manual weekly tabulation and publication of timely auction results in the Sydney Morning Herald in the late-1980s, just as auctions really took off as a means of sale in select Sydney suburbs. It came from the results faxed by Sydney's leading estate to the team of property journalists at the paper.

Click to enlarge

This December 1990 SMH article (above) illustrates the first two years of the auction result coverage starting with the December 1988 clearance rate of 50% dipping interestingly to a 36% low by November 1989.

Prior to that there had been private treaty results, sans street number, which leading franchise groups had mailed to the SMH after settlements.

The weekly auction tabulating was subsequently outsourced to the content management firm of Horan Wall & Walker who produced the  Home Price Guide and this morphed into what is now the Fairfax Media-owned Australian Property Monitors whose general manager Anthony Ishac today defended the clearance rate method in the AFR.

"APM believes the vast majority of agents do the right thing and report results in a timely and transparent manner – inclusive of properties that fail to sell or that are withdrawn from sale."

"APM has been collecting and publishing auction results for the major capital cities for more than 20 years, providing a reliable snapshot of how demand and supply in the auction market is behaving and as a leading indicator for the overall property market," he advised.

Ishac effectively argues Bayley is wrong to imply clearance rates “cannot be relied upon to show trends in the industry.”

While Bayley suggests the results give "almost meaningless results and limited insights", Ishac is right to assert that auction clearance rates do reliably provide the earliest of indicator of the property market performance.

And by the way history shows the February clearance rate is almost always higher that December's finish.

But ofcourse pauses can prompt changes in market sentiment so there are no guarantee's February will achieve the same levels of 2013's auction success.

I keep seeing debate on that the 2013 property market was different to past cycles.

So just maybe February 2014 could be weaker than December? 

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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