Sydney clearance rate hits lowest level in 15 years amid coronavirus restrictions

Sydney’s auction clearance rate has hit its lowest level in 15 years following a ban on public auctions to help curb the spread of coronavirus.

The city recorded a clearance rate of 36.3 per cent for April, according to Domain’s latest auction report card, with the rate falling 17.6 percentage points from March.

The significant drop is largely due to a surge in auction withdrawals after the federal government banned public auctions from March 25, as part of social distancing measures to slow the spread of COVID-19.

“The number of auctions that were withdrawn in the immediate weeks following the ban bounced to record highs,” said Domain senior research analyst Nicola Powell.

More than half the properties meant to go to auction in April were withdrawn, pushing Sydney’s clearance rate below the lowest level recorded in the downturn – 40 per cent in late 2018.

It was an early sign of market weakness but might not mean significant price falls would ensue, Dr Powell said, given the spike was a direct response to a government policy change.

Dr Powell said most remained for sale, with the vendors – many of whom put properties on the market before the ban – switching to private treaty or expression of interest campaigns, instead of continuing to virtual auctions. However, these properties were still classed as unsuccessful auctions, dragging down the clearance rate.

Of the sellers who stuck with their auction campaigns, almost 30 per cent accepted an offer before auction, above the 24 per cent decade average but down from the recent high of 33 per cent. Properties sold prior are also counted in the clearance rate.

“It shows sellers were willing [to meet the market] and perhaps had a fear of what lies ahead for sales,” said Dr Powell, but she noted the sold prior rate appeared to have peaked.

Of those properties that went to online auction, 36.6 per cent sold under the hammer. The strongest clearance rates were recorded in the city’s inner west, north-west, south-west and Canterbury Bankstown, which each had clearance rates between 40 and 50 per cent.

While the first two weeks of April were particularly tough, buyer and seller sentiment had improved since, said Ray White NSW chief auctioneer Alex Pattaro.

“The second half of April was really positive, [for online auctions] we had a 50 per cent clearance rate, and they had an average of four bidders at each and 2.5 active bidders,” Mr Pattaro said. “Prior to COVID-19, our average for active bidders was at three.”

Mr Pattaro, who had seven scheduled auctions this weekend, expected more properties to run through to auction day in the coming weeks, as they hit the market after the ban was put in place. Dr Powell echoed his sentiments and expected the withdrawal rate to stay down while auction volumes remained low.

While some vendors who hit the market pre-COVID-19 restrictions were holding on to higher price expectations, Mr Pattaro said, those coming to market now had more realistic price hopes. He added Ray White was seeing a push to run auctions at the end of May and in early June.

About 210 properties are scheduled for auction in Sydney on Saturday, less than half the 451 properties scheduled on the same Saturday last year. However it’s more than the 151 scheduled for Melbourne, which typically has higher auction volumes.

“The auction market in Melbourne is showing more signs of weakness than Sydney’s market,” Dr Powell said. “Melbourne has recouped all of the value that was lost during the downturn, whereas Sydney was still on path to recovery, maybe leaving Melbourne a little more exposed.”

While Sydney’s auction medians for houses and units were up slightly over the three months to April 30, Melbourne’s median dropped 1.9 per cent for houses and 2.2 per cent for units. Meanwhile CoreLogic figures, released on Friday, showed home values had slipped in Melbourne, but had continue to rise – albeit at a slower pace – in other capital cities.

Dr Powell expected clearance rates to remain low until the auction ban was lifted. However, given the far smaller proportion of homes headed to auction, she noted the rate would give less insight into overall market performance.