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Auction results & clearance rates – how can they help you when buying a home?

Melbourne Auction Results

Melbourne auction results are published by newspapers and property industry websites. These barometers give a view of market sentiment but there are reasons to question their statistical reliability and accuracy.

The usual method for collecting data is to call Real Estate Agents and ask them for the results of auction activity, or they ring through this information themselves.

Not all Real Estate Agents can be reached, every time. Or conversely, in the transfer of information process, a responding Agent may not be able to get a convenient connection with the data collectors. Naturally, the data will be skewed in favour of Agents who are keen to confirm they have notched up sales. Those who have had a less successful day at the office may prove to be more elusive or less forthcoming with their results.

The Saturday auction results are included only up to a particular cut-off time. So, auctions held later in the day don’t get included. Statistically speaking, there often aren’t that many auctions on any given day. So the unreported data makes a gap in the picture. Metropolitan Melbourne is about 160 kilometres from North to South and almost as wide, and it’s important to note that the auction results are from across a wide range of different areas and property types. When the data is merged together it will reveal quite broad trends only.

A source of valuable information

But there are real positives, and important information, you can extract from auction results and their respective figures.

Firstly, the data can reveal what is happening in the particular area you wish to buy in, or sell.

Secondly it’s a tool that can be utilised to compare how the market is tracking overall, and compare it to the same period in the previous year.

Similar to the stock market

I regard Melbourne auction results and clearance rates as indicators similar to the stock market’s ‘bears’ and ‘bulls’. Generally, in a consistent market where sellers and buyers are on even terms, the clearance rate figures trend around 65% to 70%.

If the clearance rate drops under that, the ‘bears’ are coming out. And if the rate hovers around 70% or above the ‘bulls’ are out, in a sellers’ market and they have the upper hand. Market sentiment and confidence will reflect that and house prices will also be heading up.

When is best to trade up? Or best to trade down?

A flat market (buyers’ market) can be an ideal time to trade up to a larger home.
If you own an $800,000 home and the market has just fallen by 10% that home is now valued at $720,000. But the $1.4 Million home you’re hoping to buy has adjusted down to $1.26 Million. Overall, you would be better off by $60,000 by buying at this juncture. Plus, when the market rebounds, further gains may be made.

Alternatively, if it is a heated sellers’ market it can be a great time to scale down. There are benefits to be reaped in that transaction also.

These two scenarios are generalisations, but give an indication of how you can work within the Melbourne market, using clearance rates and auction results as a barometer, to buy, or sell more effectively and get the best results.

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