Sydney’s Auction Clearance Does Not Hide Truths In Its Closet

Low cash rates, made even lower by the latest RBA cut may trigger the housing market towards a bullish zone. The euphoric mood also results from the wonderful postings by the auction market. Pete Wargent for the Property Observer talks about some 90% auction clearance rate in Sydney’s inner west area.

84% clearance rate is near-extraordinary

An average of 84% auction clearance certainly seems to bring home good tidings. Just as the unemployment rate can never touch 0%, argues Wargent, auction clearances can never record 100% rates either.

The underlying logic is simple: a decent number of homes will always be in their settlement phases or be stuck in contractual disputes.

To cut the story short, Sydney property market is all geared up for even better results in immediate future.

You can read the original article here.

Classification of the clearance figure

I wish to further elaborate on the point of auction clearance. There is a special reason why Sydney’s clearance rate promotes great optimism. The clearance figures generally talk about three distinct categories of sales. Among them, the categories “sold before auction” and “sold after auction” create ambiguity.

Sydney’s clearance figures are not ambiguous

For all you know, such properties might just have been sold via a private treaty or a boardroom arrangement. Sydney (and to a large extent Melbourne) records a maximum percentage of “Sold at auction” sales- the third category.

This implies that there is definite buoyancy in the market. There is greater reason for cheer because Sydney has posted such auction rates despite a clear hike in listings.

Do you think auction clearance rates sufficiently reflect consumer sentiment?