Is the reduction of clearance rates in Melbourne expected?

Over the course of the past two months the weekly clearance rate in Melbourne has dropped from the mid 70 range to the mid 60 range; the reasons for this are many and varied and have been discussed and debated.

There is no doubt that the record volumes of homes for sale at auction have had an impact during 2013, however due to the mismatch between what individual buyers are looking for and what is on offer, there is no linear relationship between stock levels and the clearance rates.

Fundamentally, high stock levels don’t cause a commensurate fall in the clearance rate.

Analysis of RP Data’s auction results show that the reducing clearance rate in Melbourne in late spring and in December is a trend which has occurred in four of the past five years.

In 2012 clearance rates in the high 50’s fell to the low 50’s by the end of December.

In 2010 there was a very similar pattern to this year with low 60’s falling to low 50’s, and in 2009 there was a smaller fall from the low 80’s to the mid 60’s.

In 2011 it was a different case as the market was at a low point with activity in the auction market very subdued and a clearance rate persistently in the very low 50’s.

Further analysis suggests that from a city wide perspective the highest clearance rates in spring are found in the weeks before the September AFL Grand Final and when market activity lifts out of winter.

With this in mind vendors looking to sell in the second half of 2014 should aim to do so early to allow them an opportunity to take advantage of the better buying conditions in December.