Auction predictions reveal investor caution

by Madison Utley09 Apr 2019

Data from CoreLogic has shown a slowly strengthening auction clearance rate – with three consecutive weeks holding above 50% – yet it appears as if uncertainty around upcoming events is still dampening the market in a significant way. As a result, what is traditionally one of the busiest weekends of the year could see a much lower auction clearance rate in 2019.

Kevin Brogan, CoreLogic national auction market commentator explained, “When the market loses energy, one of the first signs is the auction clearance rates start to fall. The reason is that vendors are not recognizing the fact that the market is slipping and they’re keeping their reserves out of reach of the highest bid.

“Now, vendors are likely looking at the media coverage, at the market conditions, and they’re wanting to make sure that they’re setting their reserve at a level that is realistic in the current market rather than at their aspirational reserve.”

As a result, buyers who are watching clearance rates drop are more motivated to go to the auction rather than make an offer on the property beforehand as they can sense vendors’ willingness to reassess the asking price.

However, despite this progression towards more realistic pricing, Brogan pointed out that “in a time where the market is a bit softer, uncertainty might be causing people to hold back.”

To illustrate his point, he compared the last full week before the long Easter weekend in 2018 to the predictions for the last full week before the holiday this year.

“Last year we saw a very significant spike in auction activity, but we’re just not seeing that for next week,” Brogan said.

CoreLogic data predicts that there will be 2,098 auctions next week, as compared to the 1,978 evidenced this week.

“By contrast, the week before Easter last year, there were 2,071 auctions in Melbourne alone,” said Brogan.

There were 3,990 auctions across the country, nearly double what is predicted for this year.   

Brogan said that the figure is likely due to a “wait and see” attitude by investors who are cautious to act before events such as the proposed changes to negative gearing, the availability of funding, and the federal election shape the market moving forward.

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