Melbourne auction report card: March 2019
According to The DR NICOLA POWELL from Domain
Clearance rates have a tendency to bounce during late summer and early autumn, with March being a particularly seasonally strong contender.
It is important to bear in mind when dissecting the weekly and monthly clearance rate that this time of year always seems to be more fruitful for vendors. No matter how the broader market is performing, auction clearance rates lift early in the calendar year.
It is a seasonal trend which stems from the ebb and flow of buyer and seller activity. Seasonality will diminish as winter unfolds, but will re-emerge during the spring selling season, before declining again as we head off on summer holidays.
March may have provided the highest monthly clearance rate since the beginning of spring last year but it remains 12.9 percentage points lower than last year, and a staggering 26.4 percentage points down from 2017.
While a seasonal bounce in clearance rates is evident, over the month auction results were holding reasonably firm on higher volumes. Just over 1900 auctions were scheduled throughout February versus a March rebound of just over 3200. Higher volumes can certainly test the market appetite.
It is anticipated that the number of homes going under the hammer is likely to hold firm during early April, in the lead-up to Easter. If clearance rates continue to hold at just under 50 per cent over the first two weekends in April, it could be an indication that seller pricing expectations are adjusting to softer market conditions, making for a more balanced price outlook between buyers and vendors.
It becomes troublesome when comparing auction volumes over March, with Easter occasionally falling in the month and the number of Saturdays within all having an impact.
March this year did benefit from a later Easter and having five Saturdays, a day renowned for auction action. Despite this, the number of homes that went under the hammer was 36.1 per cent lower than last year, despite last year’s volumes impacted by an earlier Easter.
Volumes may have lifted over the month but in broad terms are reflective of pre-boom levels. Overall, we are continuing to see fewer homes go under the hammer. This is occurring despite March being a strong month seasonally for housing performance, indicating that sellers are cautious given there are fewer buyers willing to bid.
Houses versus units
Units continue to outperform houses, and the difference between the clearance rates appears to be growing.
This has not always been the case for Melbourne, with houses tending to produce stronger clearances relative to units. Towards the end of 2017 an alignment between house and unit clearance rates started to emerge, and by the beginning of 2018 the difference began to grow, with units surpassing houses consistently each month – the first time since 2009-10.
Two key factors are likely to be driving this. First, the desirability and affordability units offer in terms of proximity to the CBD. Second, fewer units are auctioned each month, which could help to maintain a higher clearance rate.
Auction performance remains varied across the city. The clear standout performers were the inner east and inner urban, which produced clearance rates of 55.9 per cent and 53.7 per cent.
Melbourne’s inner east has shown some more promising results, compared to other areas. While fewer homes have gone under the hammer over the year, the clearance rate has held firm.
The outer east also achieved a clearance rate above 50 per cent and the north west almost hit this benchmark. There were only four areas that managed to surpass Melbourne’s headline result, with all other areas underperforming.
Melbourne’s auction-centric areas have a tendency to perform better under softer market conditions. Buyers and sellers have a greater familiarity with this transaction method and auctions are also skewed towards higher price points, so it is logical the higher-priced inner areas would hold up better than the lower-priced outer areas.
Buyers continue to seek negotiations following an unsuccessful auction. February saw an underwhelming clearance rate of 47.1 per cent. Many properties went to post-auction negotiation, so if these sales are included in the original clearance rate, success rises to 63.3 per cent four to six weeks following the auction day.
It is not unusual to see buyers swayed by post-auction negotiations under softer market conditions. Competition between buyers is reduced and sentiment is more cautious, with many seeking greater value and not wanting to over pay. It could also signal sellers are more willing to negotiate on price in order to secure a timely sale.