It can take relatively high clearance rates in the past two months at face value and are not the result of low real estate stock levels, an economist says.
Research by Domain economist Trent Wiltshire showed that this was most likely an early sign of a market turnaround and low auction numbers not caused rising prices and higher clearance rates. His research stated that this was most probably an early sign of a market.
Small numbers of auctions not caused turnaround and increasing prices, and greater clearance rates. “There’s been commentary suggesting that clearance rates have boosted by the low number of auctions,” he says. “Historically, that hasn’t been the case.”
Research by Wiltshire looked at monthly clearance rates since 2005 and discovered the reverse to be true; greater clearance rates had months with more auctions. “Regardless of the number of auctions being held, clearance rates are still a timely and accurate indicator of market conditions,” he says.
Similar observation by CEO Doron Peleg about Low listing volumes mean sellers hold the power.
He said there were “very clear and consistent signs of recovery” in the market and this turnaround, and further improvements in auction clearance results, could lead to an increase in volume. Just as last week’s preliminary clearance results in Sydney hit just below 85 percent and in Melbourne were just shy of 80 percent.
“Clearance rates in the 80s put sellers in a very comfortable position. We are also seeing, from the independent source of the Westpac-Melbourne Institute, significant improvements in consumer sentiment in relation to house price expectations and time to buy a dwelling indices,” he said.
Basically, what we are seeing is improving confidence, improving clearance rates and improving prices. In fact, according to CoreLogic data, in July 2019, dwelling values increased across all capital cities except for Adelaide, Perth and Canberra.
“This shows that sellers are in a good position, they see an improvement in the market, and they are in control of what happens next. Both Sydney and Melbourne are performing really well, especially Sydney in recent weeks”.
“The key thing we are seeing is very consistent and strong results, particularly, but not only, in the high end of market.”
“The recent auction clearance rates and improved consumer confidence are creating a very clear trend, that will consequently lead to price increases and a rise in volumes, as sellers expect stronger demand for their properties and, therefore, are more confident to put them on the market,” he said.
“In addition, with auction clearance rates in Sydney and Melbourne, we are seeing very clear signs of recovery. The trend now is very clear with interim results in the 70s and 80s over the past four weeks and final clearance rates in the 70s for that period.”
“This is a good trend and with the recent rate cuts by the RBA, the high likelihood of another this year, and potentially one in first half of 2020, this are looking positive,” Mr. Peleg said.
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