Why is auction data so important?

August 2020

 
Auctions continue to captivate the public’s attention, the notion of a group of people battling it out in a bidding war with their dream home on the line continues to allure people.

Weekly auction statistics are read with great interest across Victoria. The Real Estate Institute of Victoria (REIV) invests significant resources into producing accurate auctions statistics that provide an insight into the Victorian property market. Our methods and processes have stood the test of time, never more so than now. The pandemic and resulting restrictions made property transactions challenging for all involved.
 
Weekly auction statistics are one of the most visible and talked about numbers, but they are one of the many measures to consider. Clearance rates can provide an insight into the level of desire among buyers, high clearance rates can indicate higher demand for local property.
 
Historically, auction clearance rates have been a good indicator of price trends. Clearance rates provide a snapshot of the market, higher clearance rates often indicate higher property values, and when clearance rates are lower, we can find that property values are also more affordable.

So, what does it all really mean and how is it calculated?

 
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Note: The illustration compares house and unit annual price change with the 12 month rolling clearance rate for metropolitan Melbourne in the last five years.


What is a clearance rate?
Clearance rate refers to all properties sold by auction as a percentage of total reported auctions.
 
What does it indicate?
A higher clearance rate can show strong buyer demand at that time. It is important to remember that auctions account for approximately 20% of all residential sales in Victoria. The method of sale selected for a property depends on a range of factors.


 

The detail


Reported Auctions: The number of auctions reported to the REIV, including properties that were sold by auction as well as those that were passed in.
No assumptions i.e. if the REIV has not been advised of the result of a scheduled auction, we do not include that property in the results. This ensures accuracy of information. The REIV publishes the number of results reported alongside all weekly auction data. On average REIV receives over 90% of weekly auction results by the following Wednesday. 

 

Sold by auction:  A property sold under an Auction Authority and under Auction Conditions is counted as sold by auction. This includes:

  • Sold before Sold prior to the commencement of a scheduled auction.

  • Auction sale Sold at auction or by negotiation on the same day following the conclusion of the auction.

  • Sold after auction Sold on the day following the day of auction.


Passed In: Property did not sell at auction as defined above.
 
Postponed: The auction for a property is re-scheduled to a later date. This property is included in the week the auction is eventually held.  

Withdrawn: Property did not go to auction as scheduled. Common reasons include a change in method of sale or property is withdrawn from the market to be sold at another time.
 
Some data analysts incorrectly treat “withdrawn” property as “passed in” assuming the property did not sell. The REIV does not include withdrawn auctions in the total reported auctions as that can be misleading. The clearance rate is a measure of success of the auctions in that period. A property where the method of sale may now be private treaty should not be considered as part of the auction process.



 

So why do clearance rates differ across providers?


Data collection businesses often use varying methodology, rules, and definitions to calculate the weekly clearance rate. It is important to refer to the detail and understand the reasons for the difference.

The REIV only uses reported auction results, making no assumptions about the non-reported results. Analysts that treat an unreported result as a “passed in” can skew the information. REIV data is directly sourced by our Melbourne based team, from agents all over Victoria.

Only reported auctions during the period are included when calculating the clearance rate. The clearance rate is a measure of success of the auctions in that period. A property where the method of sale may now be private treaty should not be considered as part of the auction process. When withdrawn properties are treated as a “passed in”, the outcome can be misleading.

The pandemic has thrown many challenges, last-minute changes to methods of sale, auctions held mid-week, etc. While number of transactions has fallen, properties that are being presented for sale via auction or private treaty, are selling well pushing up clearance rates.

No measure should be looked at in isolation – which is why REIV publishes all details publicly at website: www.reiv.com.au/market-insights
On our website you will not only find auction details for the week, you will also find private sales, number of scheduled auctions that were not reported, medians, days on market and more.

The REIV method has stood the test of time and has been a true reflection of current buyer demand.

In a market dominated by a pandemic, that has drastically reduced the number of auctions held, people have questioned why high clearance rates are still relevant. These are strange times, historically when the number of auctions drops, clearances rates tend to also plummet. This year despite Covid-19 the Victorian real estate market has scored consistently high clearance rates every week, buyers are still snapping up Victorian property as soon as they can.

With the exception of June (66%), Monthly Auction Clearance Rates have not dipped under 70% since July 2019 in Victoria; despite Coronavirus, our market is outperforming last year. A reduction in the number of properties available for sellers has led to the demand for properties skyrocketing, and buyers are still hungry to buy real estate in Victoria. A great demand for Victorian property has led to prices staying healthy.

As the peak representative body for real estate in Victoria, the credibility and reliability of our data is very important to every homeowner, tenant, buyer in addition to the real estate sector itself.

REIV Members contribute to and rely on this information as a true reflection of the market.

 

Andrew Meehan, CEO/ Director and Co-Founder of Nicholas Lynch says “There is no doubt that the Auction Results as published by the REIV are the most accurate of any of the auction result figures published. This is a result of the REIV being the trusted peak body for Real Estate agents and the proven methodology that the REIV has developed over many years in the collection of that data.
 
The REIV Auction results are the only true publicly available indication of the current state of the market and should be the only ones that an informed consumer should rely on.

 

 

Anthony Molinaro, Licensed estate Agent and Auctioneer at OBrien Real Estate says, “It's amazing how many withdrawn listings are counted as a result by other providers. Most of the reasons causing a withdrawn listing are uncontrollable and this has to be in play when reporting results.
 
As the industry body, it's ultra-important that the data provided is of an accurate nature and not just numbers. In saying that, I believe the results provided by the REIV have been more accurate and more importantly at a time frame that is acceptable. Not just being the first to supply the auction results. Showing that accuracy of data is more important than speed of data!
 
Auction results are broadly discussed across the state to play on how the market is fairing (and although I personally believe this is not always accurate to do so) it is the way the general public perceive the market. So, ensuring the results are accurate and the methodology in achieving this, is more important now than ever.”

 

 

Adam Docking, Director/ Auctioneer at Docking Real Estate says, “I have always treated the REIV sales data as the only true, accurate measure of the Victorian real estate sales market.  The REIV is the only organisation which truly understands the collected information and how to accurately analyse and report it to the greater public without bias or agenda.
 
It is industry run but strictly regulated which makes the REIV sales results an essential tool for not only the buying and selling public but also the public and private sector.”
 

As always, if a buyer or a seller is looking for objective information on the market or an agency– they should visit https://reiv.com.au/market-insights
 

 
Gil King
REIV CEO