What do auction clearance rates mean?

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on April 20, 2022 Fact Checked
What do auction clearance rates mean?

If you are in the market for a new property, one of the many phrases of property lingo you’ll encounter is auction clearance rates - but what exactly do they mean?

Auction clearance rates provide an indication towards the current trends of the property market based on the number of properties sold via auction each week. This rate is expressed as a percentage of auctions that led to a successful property sale. Generally, if an auction clearance rate sits close to 80%, it is considered ‘high’ and could indicate buyer demand for purchasing property is exceeding current market supply.


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Lender

Variable
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UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
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UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
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AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
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NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.

Variable Home Loan (Principal and Interest)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 26, 2022. View disclaimer.


Calculating the auction clearance rate

To calculate the auction clearance rate, the total number of properties sold at auction is divided by the total number of properties listed for auction.

ACR.jpg

Source: Domain

High vs low auction clearance rate

High auction clearance rates typically indicate:

  • Strong buyer demand

  • Growing property market

  • Under-supply of available properties

  • Hot market for sellers

On the other hand, low auction clearance rates typically indicate:

  • Weak buyer demand

  • Slowing property market

  • Over-supply of available properties

  • Market moving in favour of buyers

Traditionally, auction clearance rate data is calculated on a Saturday evening, with results reflecting the outcomes of the day and published in Sunday newspapers and publications. A higher volume of auction numbers generally pushes the clearance rate down, and vice versa.

There are four key organisations that measure and publish auction clearance rates: CoreLogic, Domain, REA Group, and SQM Research. Occasionally the numbers might be different between the four, which can come down to when and how they calculate the data.

For example, SQM does not publish a preliminary clearance rate, and finds preliminary rates often exclude up to 20 to 40% of all properties that went to auction. Many of these properties are passed-in. By publishing the full results, the clearance rates are often lower.

What factors can impact auction clearance rate?

Auction clearance rate results can differ if data is delayed or properties are withdrawn from sale yet counted in original calculations. Auction clearance rates may include both the sold at auction results and those sold directly before or after. Properties withdrawn or passed-in are also collected and included. Both withdrawn properties and passed in auctions are classified as ‘no sale’.

External factors may also influence auction clearance rates including current interest rates, the availability of credit, price expectations of venders, number of competing auctions, number of actual bids placed and the suburb of the property. Further, sporting events, religious holidays and the weather may also influence the rate as lack of attendance may prevent a home from clearing at auction.

Read more: What are the benefits and drawbacks of buying a property at auction?

Why should you keep an eye on auction clearance rates?

Auction clearance rates provide an indication as to how the housing market is travelling, while also outlining economic performance. This is particularly relevant when it comes to managing investments and choosing the best time to buy or sell a home.

Low clearance rates point to low demand, which may be due to a weakening job market as fewer people can afford to buy and move. High clearance rates, on the other hand, can point to higher consumer confidence as individuals feel prepared to take on such large expenses as buying a home.

As you explore the housing market and learn more about auction clearance rates, keep in mind that these rates aren’t the sole factor to determine housing trends. It’s impossible to know exactly how a market may move, but you should consider it one of many data points to mind as you prepare to buy or sell. When considering purchasing a property, be sure to look at other factors outside of auction clearance rates such as pricing trends, interest rates, demographics and economic outlook.


Image by Rodnae Productions via Pexels

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Jacob Cocciolone joined the Savings team in 2021 as a Finance Journalist. Driven by a passion for keeping Australians up to date with the latest financial news and trends, his areas of interest include financial technology, investing, property and motoring.

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