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Jeremy Sheppard Blog post by Jeremy Sheppard

Auction Clearance Rate: What is it? Are there Anomalies in the Data?

Hi I’m Jeremy Shepherd. I’m talking about the Auction Clearance Rate, which we consider at Empower Wealth when performing our research.

The Auction Clearance Rate is the percentage of properties that sell at auction compared to all the properties that go to auction.

Not every property that goes to auction sells. Some are withdrawn prior to auction, some are passed in at auction, some sell prior to auction, some sell after the auction; and, of course, some sell during the auction. (Watch the Tips for Buying at Auction.)

If there are 5 properties that go to auction and 3 of them sell, then the Auction Clearance Rate would be 60%.

A good Auction Clearance Rate would be 70 – 75% percent, or higher.

This is an indicator of a market where demand exceeds supply — and this is what we’re after as investors.

A poor market would be one where supply exceeds demand, and you might see Auction Clearance Rates as low as 40%, or even 0%.

The Auction Clearance Rate isn’t the only indicators you should look at for measuring supply and demand.

It does have some anomalies.

Some states and territories around the country don’t have auctions as frequently as others. There are also cases where properties will go to auction if the property is, for example, a deceased estate and the property must sell — in this case, the vendor doesn’t care about the auction result so much. There might also be distressed properties that are sold very rapidly, and so this can skew the figures.

So you shouldn’t rely entirely on the Auction Clearance Rate.

 

If you’re interested in more metrics other than the Auction Clearance Rate, you can check out some of our videos on the Research Page.

Thanks very much for watching. Please feel free to leave comments below:

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