Rise in unreported auction rates masks property market reality: SQM Research
The rise in the number of unreported auctions could mean bad news for the property market, according to SQM Research.
“In life, there is a tendency to want to report good news but not so much the bad news,” says Louis Christopher, managing director of SQM Research in its latest newsletter.
And over the years this “primal tendency” has compromised the voluntary reporting of auction results, he says.
This could suggest there is more bad news in the property market, notwithstanding any surge in listings which may make it difficult for auction reporting teams to compile the results before the day is out.
In this regard, I thought it worthwhile republishing some historical auction numbers from this year, 2015 and 2012.
A comparison between the data from earlier this year and 2015 is striking, particularly for Sydney. In 2015, the Sydney market was rising at its fastest rate in 30 years.
The numbers give you an understanding of relative unreported rates during the best of times verses the current times where last weekend, nearly 30 percent of auctions were not reported.
In 2015, auction clearance rates were higher and unreported auction rates were lower. Volumes were also about 10% lower – perhaps making it easier for the auctions collection team on the day.
Turning the clock back to 2012 – a time when the Sydney and Melbourne housing markets were nearing the end of a two-year downturn, auction clearance rates were lower. However, auction reporting rates were higher and improving.
Auction data on Melbourne is not available, he noted.
Overall, the evidence suggests that home prices are still rising in Sydney and Melbourne. However, clearance rates are off their peaks and unreported rates have been rising, particularly in Sydney. Listings are also higher, suggesting more vendors may be thinking the property market is at its peak or close to it.
“In my opinion, clearance rates need to be lower than current levels before a peak and new downturn can be called.
“We need to see clearance rates fall to around mid 60 percent for Sydney and high 60 percent for Melbourne. We are not close to those levels yet even after making an adjustment for unreported rates,” says Christopher.
So, prices are still going up in those markets but “we are getting close to a top and perhaps the major banks passing on the bank levy might just be the point which creates a trigger for a slowdown” concludes Christopher.