Ongoing weakness in auction results is highlighting an ongoing gap between buyer and seller price expectations, according to RP Data research analyst Cameron Kusher.
For the year to date (excluding the weeks prior to 16 January) the weighted average auction clearance rate on a week to week basis has been just 48.1 per cent – compared to 60.4 for the 2010 calendar year and 69.2 per cent in 2009.
“With clearance rates recording a below average result of approximately 50 per cent across the combined capital cities it looks as though vendors may still have higher price expectations than what buyers are prepared to pay,” Mr Kusher said.
Although auctions account for a relatively small portion of the overall market, auction clearance rates are one of the best indications of current market conditions, according to RP Data, particularly in Melbourne and Sydney where auction sales are much more common.
“The significant weakening of clearance rates is reflective of the slowdown in housing market conditions,” Mr Kusher said.
“Clearance rates have eased, property value growth has flat-lined and fallen in some cities, sales volumes have dropped and time on market and vendor discounting levels have increased.”
While clearance rates have weakened, the number of auctions taking places is actually higher than during 2009, when the market was particularly strong.
Across the country in 2011 there have been 1,291 capital city auctions, on average, per week. This compares to 1,534 last year and 1,173 in 2009.
While many buyers believe they can get the best price for their property at auction Mr Kusher said the odds of selling at auction were now reduced.
“Given that clearance rates have weakened substantially, it does seem counter intuitive that auction volumes have remained quite strong. This must be weighed against the fact that it currently takes an average of 59 days to sell a home and vendors on average have to drop their asking price by -6.5 per cent,” Mr Kusher said.
Mr Kusher said he recommends vendors become more realistic about pricing in the current market.