Here's why you should treat preliminary auction clearance rates with caution, especially in Sydney

Cameron Spencer/Getty Images
  • Auction clearance rates continue to hover around 50%.
  • Market activity will drop this week, largely reflecting lower volumes in Melbourne and Sydney.
  • Australian home prices fell by 0.6% in March. The early data from April suggests declines are continuing, but only in Sydney and Melbourne.

Only half of all homes taken to auction sold last week, according to updated figures from CoreLogic.

Final clearance rates across Australia’s combined cities held steady at 50.9%, well down on the 64.8% level recorded in the same corresponding week a year earlier.

CoreLogic

The final figure was well below the 56.8% preliminary estimate offered earlier in the week, largely reflecting a massive downward revision in Sydney.

It’s preliminary estimate was revised down from 65.9% to a final reading of just 54.3%, providing a welcome reminder not to put too much weight on initial readings.

“The significantly higher slippage between preliminary and final auction clearance rates in the Sydney market suggests preliminary estimates should continue to be treated with extra caution,” said Matthew Hassan, Senior Economist at Westpac Bank.

“Indeed, the scale of the differences argues strongly for waiting until final results are published before judging week to week developments.”

When looking at preliminary estimates, it’s often good practice to look at the proportion of results reported. Usually, the weaker the reporting level, the larger the downward revision will be to the final estimate.

Large downward revisions were also seen in Brisbane and Perth last week, with smaller revisions seen in Melbourne and Adelaide.

Looking ahead, it looks set to be another quiet weekend across the capitals with just 1,862 auctions scheduled to take place, down from 2,164 in the previous week.

Volumes will fall in the largest capitals, Sydney and Melbourne, with 700 and 840 homes respectively set to go under the hammer, down from 801 and 978 a week earlier.

Activity levels will also decline in Adelaide and Brisbane but will pickup in all the remaining capitals.In

In separate data released by CoreLogic earlier this week, median home prices across Australia fell by 0.6% in March, a slightly slower pace than the 0.7% drop recorded in February.

March is typically the seasonally strongest month for Australian home prices, reflecting that much of the settlement data is based on transactions early in the year when turnover levels are generally lower.

Based on data received so far in April, median prices in Sydney and Melbourne have fallen 0.2% with flat results seen across the remaining state capitals.

Despite a sharp reduction in new property listings in recent months, total listings still remain higher than a year ago, reflecting weak demand stemming from tighter lending standards, reduced activity from local and offshore investors, uncertainty ahead of the federal election along with less urgency from prospective buyers to transact at a time when prices are falling.

With demand still soft, recent price declines reflect that some vendors are willing to “meet the market” and sell at lower price levels.

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