The past two weeks of auction results in Melbourne have echoed patterns which emerged during the first lockdown, suggesting the former can be used to predict how the second will continue to unfold, according to CoreLogic analysis.
On July 9, the Melbourne and Mitchell Shire went into a six-week lockdown, with auctions once again going remote and property inspections transitioning to appointment only.
“The first familiar trend is a significant increase in the portion of properties withdrawn from auction,” explained CoreLogic head of research Australia, Eliza Owen.
“Prior to COVID-19, the five year historic average withdrawn rate for Melbourne auctions was about 3.0%. As of the week ending July 19, the rate of withdrawn properties has once again started to climb, reaching 42.0%.”
The high rate of withdrawn properties both reduces and, to some degree, distorts the clearance rate while also lowering volumes.
“Withdrawn auction results are counted as a ‘non-sale’ at auction. While this consistent methodology has allowed us to understand a true representation of the success rate of auction methods in particular, it does mean that the auction clearance rate becomes limited as an indicator of demand,” said Owen.
“A high rate of withdrawn properties also reflects the relatively low level sold under virtual conditions, with vendors less willing to test the auction environment under lockdown. The physical restriction on auctions, as well as dampened consumer sentiment, will likely see auction volumes fall further in the coming weeks.”
However, notably, a greater proportion of properties have been sold at auction over the first week of the second lockdown as compared to the first. To Owen, this bodes well.
“In the week ending 29 March, the portion of properties sold at auction was just 9.2%. For the week ending 12 July, the portion was 23.4%,” she said.
“Given COVID-19 saw an adoption of online sales methods earlier in the year, real estate agents and auctioneers should be more prepared to pivot towards a ‘virtual’ auction environment and virtual auctions may be more successful this time around.
“If the last phase of lockdowns was anything to go by, the auction market and, more broadly, housing market activity, is likely to recover as restrictions are eased or lifted,” she concluded.