If there is one thing I like about real estate agents, they are always in a positive frame of mind. No matter what the state of the market, you can always count on a positive vibe with gushing quotes about how good the market is right now and how now is a great time to sell… or buy!
So, when you hear phrases like “sales are steady” and “the market is trending softer” you know things are not as rosy as they would have you believe and often underscore a gloomier reality.
When figures are released that show a rise in auction clearance rates during the worst economic crisis in a generation, one is excused for being a bit sceptical or at the very least, excused for wanting to have a closer look at the numbers.
In its simplest form, the auction clearance rate is a percentage of properties sold via auction relative to those that were listed and scheduled for auction. So, for example, if 10 properties are listed for sale and 7 were sold, the clearance rate is 70%. Likewise, if 1,000 properties are listed for sale and 700 were sold, the clearance rate is…… yes you guessed it, 70%. However, taking these two examples, whilst the clearance rate is the same, the state of each market is totally different.
The recent positive headlines of a rise in auction clearance rates to ‘pre-lock down’ levels masks the real fact the devil is in the detail. There are two factors driving the market at this point in time. Firstly, the fact is the available stock is much diminished. Those who earlier in the year were looking to take advantage of the market rebound that started in the second half of 2019, have now put their plans on hold and left the market.
There are two types of sellers left in the market. Firstly, those who need to sell, such as deceased estates, spousal separation and those suffering financial pressures as a result of recent job loss. And then there are those who live in pockets where demand is still relatively strong. The ACT is a good example of this where the economic impact of the COVID-19 pandemic on the large body of public service workers has been significantly less than it has in tourist regions such as far north Queensland.
The second factor driving the market at this point in time is the market sentiment of buyers. Again, this will vary from region to region but to generalise, there are fewer purchasers in the market at this point in time and this is largely due to the uncertainty of what the future will bring. There is also a segment of purchasers who see the opportunities for them is 6 months or more away.
Or to put it another way, the way they see it, things are going to get worse, before they get better.