Canberra has seen some very high auction clearance rates lately, and it's one of the first questions I'm asked lately about the Canberra market. Yet this statistic isn't one that I suggest buyers look at as the 'be all and end all' of measuring the market.
Firstly, let's take a step backward and revisit the concept.
Auction clearance rates are a measure of the number of properties that have been sold by auction as a percentage of the total number taken to auction that week. This includes properties sold prior to auction, even when that sale might have been done weeks prior. It sometimes reports on the number of properties passed in, but it won't tell you how far above the reserve it sold, whether the reserve had to be lowered to strike a sale, or the number of registered bidders. There's a lot more going on behind the stats that I'm not a huge fan of auction clearance rates.
Think of it like this, if a child looks unwell you might take their temperature. The result comes back lower than you expected; oh well, I guess they're healthy and fine after all. Not true! Ask any concerned parent and they'll tell you that all of the other symptoms, or even just a gut feeling that they're looking or behaving out the ordinary, are taken into account and may end up with a trip to the doctor to figure things out. Similarly here, the 'temperature' or auction clearance rates of the market are just one singular measure.
So what should buyers look at then, if not auction clearance rates?
If we look at volume instead, it's clear that Canberra at the moment doesn't have much on the market. The number of homes taken to auction is down in the 30's, which is very low. Reading into the results of so few sales isn't really smart from a statistical point of view as there's not sufficient data from which to draw reliable conclusions. It's been volatile; some weeks very high, others down at 55% in early July. Despite a strong auction culture for freestanding homes in Canberra, it's usually popular family homes that are taken to auction as they generally draw a competitive number of bidders however some units and townhouses are sold by auction too. There's no hard and fast rule - it's more of an industry generalisation.
Public holidays will also affect auction results, although that's less impactful now with fewer people travelling away for long weekends than pre-COVID times, but it's still important to take into account agent's aversions to holding an auction on a public holiday weekend.
Vendor discounting is another measure to look at to gain insight into how the market is really tracking. For auctions this can also be measured by looking at the percentage of homes withdrawn from sale or passed in at auction.
Aside from these, the other metric that's very relevant right now is Days on Market. Often referred to as DOM, this measures the number of days from when the property was first advertised online to when it was sold. Important to note, the agent has a signed contract from the vendor well before it's advertised online, so buyers have been complaining lately that homes are advertised immediately 'Under Offer', as the agent has secured a sale before it was advertised, yet the agent still proceeds with the advertisement. There's a number of reasons for that which I won't digress into here, but it's important to note that many homes right now are being sold pre-market.
If homes are in such short supply that they're selling before they are ready to be marketed online, it can make buyers feel very frustrated and many are seeking the assistance of an informed buyer's agent to get access to these types of opportunities.
Prices are rising for freestanding homes; our median house price is now into the early $800's for a standalone home in Canberra. Agents don't have enough properties to meet the strong demand and as a result, those that do make it to auction day - if they're good quality properties - are seeing some big prices paid.
Buyers also need to be aware that the auction clearance rates do include homes advertised for sale by auction that have been sold prior. So if the auction campaign was to be four weeks long from first advertised to auction date, but was sold in say the first or second week of the process, that pre-auction sale will be reflected in the week it was due to go to auction. There's a timing mis-match here to be conscious of.
Another trend we're seeing at the moment is shorter auction campaign lengths. A 'usual' auction campaign would run for four weeks but there's a growing number that are shortening to just two. This works for the vendor to still hold a competitive auction and take advantage of the pent-up demand from buyers rather than risk waiting for another fortnight in what is, let's be honest, quite crazy times. It's unclear with this re-emergence in Victoria if COVID will spread like wildfire again, despite further loosening restrictions in Canberra tomorrow. With a cloud hanging over the future, buyers and sellers alike are chomping at the bit to lock in a deal now and gain certainty.
But is it necessarily a good move to act quickly now?
On the buyer's part, we're about to enter Spring - traditionally the busiest time of the year for sellers to list their homes. And from what I'm hearing, this Spring will be no different and supply (and therefore auction volumes) are set to rise. Buyers could well be better off to sit tight, not enter into rushed transactions out of fear or frustration (of wanting a larger home for everyone to work remotely without being on top of one another!), draw breath and see what the Spring selling season brings.
There's three certainties in life; death, taxes and another property coming up for sale.
Capital Buyer's Agency