The role of clearance rates on the selling of your house

Published on November 30th, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Auctions are one of the popular platforms in which Australians love to sell their houses on. However, there is a lot that goes into preparing for an auction. If you are looking to sell your house at an auction you would have come across the term ‘clearance rate.’ Understanding how the clearance rate will affect the selling your house can have an advantage when it comes to investing and selling your house.

What is a clearance rate?

Clearance rate is basically the barometer that is used to gauge whether there are great growth and demand outstripping supply in the particular property market. The prices are usually competitive and sees many houses being driven by high prices that first-time property owners will struggle to afford. To someone who is looking to sell, this will be a perfect indicator as to whether they should put their property on the market or not.

How it affects the selling of your house

How the clearance rate is calculated differs from various sources, which means you will have to be careful when comparing clearance rate data from one source to another. what is usually used to calculate the clearance rate is:

The number of properties sold under the hammer + properties sold prior to the auction, which is then divided by all properties sold + properties passed in + properties withdrawn.

This will affect when and how much you can sell your house for. The more competitive the market the more likely it is for the price of your house to be pushed higher. According to Domain, anything above 70% is considered a seller’s market. Just because the clearance rate is high does not mean that all houses in that area are sold through an auction.

Recent clearance rates per region

It’s advisable that you take clearance rate data with a pinch of salt, as they are usually reported as data comes through prior to an auction, meaning they are subject to change.

We also don’t know if the data being reported includes the number of houses that did not make it for sale due to various circumstances.

The recent outcomes for this week for each state and territory are as follow:

RegionScheduled AuctionsCleared% of house cleared
Melbourne & Vic101384471%
New South Wales87364973%
South Australia915968%
Western Australia402124%
Northern Territory5333%
Australian Capital Territory796263%

Data sourced from Real Estate ‘Clearance rate for week ending Sunday 18 February 2018’

Follow the numbers to get a good deal?

If you are looking to make a solid investment in a property your best bet will be to follow the various property markets in Australia. The numbers don’t lie. Data will reflect an area that is performing well and ones that aren’t. Keep in mind that you will have to always compare your data to make an informed decision.

Consider the auction clearance rates along with other market indicators to get a sense of what is happening in the real estate market. Markets that report a low clearance rate usually reflect a buyers market.

However, the low numbers shouldn’t deter you as this will be the perfect time to negotiate and score yourself a sweet deal. Of course, you will have to measure up the house against your long-term investment plans to see if it will generate any profit for you in future.

The biggest mistake you can make is taking one areas performance as the overall performance in the Australian property market. One area could be experiencing a slow down while other areas are heating up. Your best bet is to keep your eyes peeled through research, and saving up towards a home loan that matches your needs, so when the right property is available you are ready to go.

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