Canberra auction report card: May 2020

Canberra’s auction clearance rate bounced by 21 percentage points from the 12-month low hit in April to reach 66 per cent in May.

The result is higher than the same month the year prior by 17.5 percentage points. Last year at this time was the federal election, which pulled back clearance rates, along with lending restrictions impeding buyer activity.

The May result is the highest monthly result since February, which pre-dates the coronavirus-related social distancing restrictions, and on-site auction and open home bans.

Prior to the COVID-19 pandemic, Canberra clearance rates had gathered momentum through mid-2019 and early into 2020, reaching a 13-year high in February at 78 per cent. The subsequent two months produced a weaker performance that bucked the positive trend.

But May produced the highest since the February high pre-coronavirus. This pullback and bounce in clearance rates align to the economic shutdown and social distancing restrictions that resulted in a ban on on-site auctions and open homes – as the restrictions have eased, so to have clearance rates.

Auction volumes are low

While clearance rates have made a remarkable rebound from April to May, auction volumes are weak.

The number of homes scheduled for auction over May is the lowest monthly volume since 2013. Around this time, auction volumes tracked consistently low because Canberra was in a downturn.

However, transactional volumes and auction popularity have grown substantially since then, making the volume comparison stark. May had a 42.8 per cent reduction in auction volumes compared to the same month last year and down 60.8 per cent compared to pre-COVID-19 volumes in February and 43.9 per cent lower than April. This highlights the dramatic impact the current health crisis has had upon the market.

Buyer and seller sentiment began to improve as coronavirus restrictions relaxed and there are a number of market indicators that echo an uplift in activity. However, May’s low volume of auctions will be helping to support a higher clearance rate.

May’s results have not been skewed by withdrawals like the month prior, although the proportion of withdrawn auctions remains elevated at 17 per cent, dropping from one-third in April. Withdrawal rates remain significantly above the decade average of 4.7 per cent, illustrating vendor wariness.

Many sellers continue to secure a sale prior to auction. Despite restrictions relaxing, it is clear vendors remain uncertain, with many opting to sell before auction day.

It is not surprising that selling prior to auction remains elevated at one in five auctions, above the one-in-10 decade average. There has been a substantial pullback in buyer and seller activity since late March. If the right offer is received before the hammer falls, vendors are accepting.

Postponed auctions bounced in May. On May 8, it was announced on-site auctions could recommence that weekend. The Saturdays of May 9 and 16 saw a spike in vendors postponing auctions, jumping to around 30 per cent of scheduled auctions. The decision to postpone will reflect the preference to the auction being conducted in-person, providing more time to organise and market the on-site auction adequately.

Since the auction ban was lifted, an incremental rise in homes sold under the hammer started to occur over subsequent Saturdays in May. At the same time, the portion of homes sold prior started to decline and withdrawn rates dropped.

Auction prices soften

The median auction price for houses increased 9.5 per cent over the year to $799,500, although it declined marginally 0.1 per cent from April.

Prices on a monthly basis tend to fluctuate. However, based on a three-month average, median auction prices for houses were up 6.1 per cent over the year and down 0.3 per cent from April. Given the low volume of units, a median price cannot be calculated.