Could a rate cut in October coincide with a turn in the market?
Historically, one of the best barometers for the health of the property market is auction data… So, I asked my colleagues at Australia’s largest real estate company - Ray White - to share their nationwide auction stats looking back at the year that has been. They collect this data every weekend, and over thousands of auction events they measure the clearance rate, number of active bidders, number of onlookers, and a variety of other useful metrics. So what do these findings tell us about where we are in the property cycle? And how does today’s market impact your client’s decision to buy property?
Midyear interest-rate cuts, a reduction in income taxes, moves by banking regulators to ease mortgage-lending rules and the start of the Spring selling season… there’s a lot going on in the property and lending space right now. So how has the market responded to these influencing factors? Because Ray White represents over 10 per cent of all residential sales in Australia, and their auction reporting system gives up to the day information on sales at a national and local level, we can look back on 12 months worth of auction data to see where the market is relative to the year that’s been.
This is what I learned looking at their graphs.
1. Despite improved clearance rates relative to this time last year, supply of stock remains a struggle. This could be because sellers don’t believe the recovery is truly occurring or it could be because some sellers still remain in the red and are reluctant to sell until the market improves to such a point they can achieve a more palatable capital gain. Perhaps the decline in interest rates only delayed the inevitable?
2. The number of auctions that were held where no bidding activity was registered shows an odd pattern. In fact, this year’s stats are in opposition to seasonal trends; in that bidding activity was weak in summer when bidding activity is conventionally strong; and has been increasing during winter when it normally slumps.. Justin Fabo, Senior Economist at Macquarie Bank highlighted in his recent September Property Insights Report that “auction clearance rates would suggest that if you’re selling a property, it’s likely to be snapped up, unless there’s something wrong with it. I’m not going to say it’s a buyer’s market, it’s not a seller’s market; there’s opportunity on both sides at the moment,”
3. It’s no surprise that as clearance rates improve the numbers of vendors withdrawing from auction declines. The Ray White data shows us that sellers are now, finally, meeting the market. So buyer’s can actually transact.
The statistics appear to be showing that some sellers just don’t believe in the recovery. As we begin the prime spring season, it will be curious to see what the data reveals.
One way or the other however, there are vendors, re-entering the market and they’re ready to meet it. So your clients can finally execute their purchasing plan, if that was one of their goals. If buying is back on your client’s agenda, make sure they’re speaking with me.