What Are Clearance Rates In Real Estate Talk?

When you hear or think clearance rates you might be forgiven for thinking that there is a big sale going down somewhere and you better get in quick. Well, probably the only word in the last sentence that relates to real estate clearance rates is the word ‘sale’.

More importantly, clearance rates in this industry relate only to properties that are sold (or not) via the auction process.

Who Gathers the Data
Apart from each individual Australian state Real Estate Institute gathering some form of this data, there are two major companies that formally gather this form of information Australia wide. They are RP Data, and Australian Property Monitors (APM).

Interestingly, these two major companies go about the gathering of this data in very different ways. It is not as simple as saying 10 properties went to auction this week and 8 of them were sold under the hammer for an average of “x” dollars.

They each have their own criteria that they use to garner the information required. The criteria that can be used by both are how many properties:

  • Were advertised for auction,
  • Were sold at auction,
  • Were withdrawn,
  • Sold before auction,
  • Sold after auction,
  • Were passed in at auction.

Each of these can be diluted even further. For example: they may only include sales made within 24 hours of auction completion. For some, the negotiations may take a day or even week or longer.

One of the companies may not include withdrawn property data. You can see how this may change the relevance of any published results.

The one contributing factor to this house of cards is the reporting. It is up to the individual agency to report the results of any and all auctions. In a good market, they are more inclined to report their successes. But in a bad market…….. You fill in the blank.

The One True Guide Post
Deakin University conducted their own research into the anomalies of this subject.

They advised that at times the clearance rate was obtained from a very small segment of the market. They also pointed out that such things as the number of bidders present for an individual property as compared with competing auctions, as well as the number of bids received were not recorded. Nor does this form of reporting show how many, if any, properties exceeded the vendor’s reserve.

The other interesting fact they discovered over this 5-year study was that the data received actually showed a correlation between auction prices achieved and actual property prices as very similar.

What Fountain Property Group can confirm is that sale by private treaty is still by far the most common form of property transaction used in Australia and our choice of negotiation.