Canberra auction report card: March 2019

Canberra clearance rates nudged lower in March by more than six percentage points compared to February, recording a clearance rate that rivals the dismal performance that the year 2018 ended on. With only four in every 10 auctions sold under the hammer or before the scheduled auction day, this is the lowest monthly result since December 2013.

Is Canberra bucking the seasonal trend? It may appear so.

Clearance rates tend to bounce during late summer and early autumn, with March being a particularly strong seasonal contender. Sydney and Melbourne have displayed this March bounce following near historical lows at the end of 2018.

It is important to bear in mind when dissecting the weekly and monthly clearance rates that this time of year always seems to be more fruitful for vendors, no matter how the broader market is performing – auction clearance rates lift early in the calendar year.

It is a seasonal trend that stems from the ebb and flow of buyer and seller activity. Seasonality will diminish as winter unfolds but will re-emerge during the spring selling season, before declining again as we head off on our summer holidays.

Canberra normally follows this trend, so it is unusual not to record a bounce. That said, this has happened before. Back in 2011, clearance rates ended the year between 43-45 per cent, then failed to improve in March, scraping by at 42.7 per cent.

As March performances go, the monthly output is the lowest performance since 2012. It remains almost a staggering 24 percentage points lower than last year, and almost 23 percentage points down from 2017.

While no bounce in clearance rates is evident, over the month, auction results are holding reasonably well on higher volumes. With more than 250 auctions scheduled throughout February versus a rebound of 320 in March. The higher volumes over the month will undoubtedly test market appetite.

It is anticipated that the number of homes going under the hammer is likely to hold firm during early April, in the lead up to Easter. However, if the clearance rate percentage holds in the low 40s over the opening two weekends in April, it could be an indication that seller pricing expectations are becoming more disjointed under the slower market conditions, with an imbalance in price outlook between buyers and vendors.

It becomes troublesome when comparing auction volumes over the month of March, with Easter occasionally falling during the month and the number of Saturdays within both impacting. March 2019 benefitted from Easter falling mid-April, and five Saturdays falling in the month – a day renowned for auction action.

Despite this, the number of homes that went under the hammer in March is 12.3 per cent lower than last year, despite last year’s volumes being affected by an earlier Easter. Throughout 2017 and early 2018, auction volumes were rising, and clearance rates were robust.

Overall, we are continuing to see fewer homes go under the hammer – numbers that have been sliding annually since mid-2018 – indicating sellers are now approaching a sale more cautiously, concerned about sending homes to auction when there are fewer active buyers who are willing to bid.

Houses versus units

Houses continue to outperform units and the difference between the clearance rates is significant.

Very few units are auctioned in Canberra; it tends to be a transaction preference for houses. This is not the case in other cities, with Sydney units producing higher clearances to houses.

The performance of units in Canberra under auction conditions is dragging down the headline result. Over March, units produced an appalling clearance rate of 25 per cent, while houses provided a better outcome at 45.6 per cent.

Post-auction sales

With a slip in clearance rates, the negotiation skills of agents are now being tested. Buyers continue to negotiate following an unsuccessful auction.

The February clearance rate was an underwhelming 49.6 per cent, but many of the vendors entered into post-auction negotiations.

If these sales are included in the original clearance rate, the success rises to 63.3 per cent after four to six weeks from the auction day.

It is not an unusual trend to see buyers swayed by post-auction negotiations under softer market conditions. Competition between buyers is reduced, with sentiment one of a cautious nature, many seeking greater value and not wanting to over-pay. It could also signal sellers are more willing to negotiate on price to secure a timely sale.