By John McGrath
New figures show more sellers in Australia’s best performing markets are choosing the auction method of sale, with auction volumes up significantly in Sydney, Melbourne and Canberra this year compared to 2016.
The best performing capital city markets right now are Sydney, Melbourne and Canberra, with home values up 12.2%, 13.7% and 9.6% respectively in the 2017 financial year.
According to CoreLogic’s newly released Quarterly Auction Market Review for the June quarter, auction volumes are up in each of these cities.
In the June 2017 quarter, Sydney had 11,458 auctions compared to 8,888 in June 2016. Melbourne had 13,122 this year compared to 11,741 last year. Canberra had 932 compared to 851.
As a percentage of total sales, CoreLogic figures show there are significantly more homes being sold by auction in Sydney and Canberra. In Melbourne, the Real Estate Institute of Victoria says there has never been more homes taken to auction.
So why is auction such a popular choice right now?
It could be argued (for many reasons) that in most cases, auction is the best method of sale. However, in strong markets it is definitely the most effective way of maximising your sale price. When you have multiple buyers interested at around the same price level, an auction is the best way to determine who has the deepest pockets.
The top 3 benefits of auction (for buyers and sellers)
1. The price is benchmarked with other buyers in public – this is the market talking
2. You get an immediate result
3. If you’re the winning bidder, you sign a contract right away to make it official
The statistics tell us auctions are working particularly well in our strongest markets.
Clearance rates are solid at 73.3% in Sydney, 75.8% in Melbourne and 68.3% in Canberra. These rates are all up compared to June 2016, but down compared to the March 2017 quarter as demand cools a little.
In other capital cities, clearance rates are weaker. One reason is that these markets are less used to auctions than Sydney and Melbourne, as you can see from the volume in each city, but the bigger reason is market conditions – they’re basically normal or soft right now.
Auction clearance rates and volumes (June quarter)
Auction hot spots
The auction hot spots around the country are as follows. These are the capital city suburbs that had the highest number of auctions in the June 2017 quarter.
The following suburbs recorded the highest clearance rates.
I asked McGrath’s Chief Auctioneer, Scott Kennedy-Green, what he’s been seeing on the ground and he confirms auctions are very popular right now.
“The number of properties going to auction within the McGrath network has increased year-on-year,” Scott said. This reinforces our view that the auction process is still the preferred method of sale.
“Buyer demand remains robust and vendors are keen to take advantage of the competitive bidding often evident at auctions and capitalise on this demand whilst buyer sentiment remains consistent.”
With clearance rates around the early- to mid-70% mark in Sydney and Melbourne (and just under 70% in Canberra), we expect auctions to remain popular. A clearance rate of 60% indicates a normal market, so conditions for auction sellers today are clearly still strong.
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