Auction Volumes Surge Past 3,000, Units outperformed houses

Auction volumes surge past 3,000

This is Corelogic data not from Realestate or Domain.

I speak to people in the industry and majority of them are of the opinion that firstly the big reason for strong auction clearances is if previously agents took everything to auction, they are now pedantic about it and know what needs to go to auction and what shouldn't go to auction.

Secondly FHB activity is increasing (hence unit sales) and that should support the sales within the 300k to the 1 million mark category which should have a ripple effect on the higher end categories due to demand any way.

As expected Sydney and Melbourne are performing very well. Sydney you Beauty

 

As expected, everyone sees what they want to see...

however, if a one has unbiased look, they may notice that
- higher volume of auctions correlates with higher number of listings which is usually observed when supply is growthing
- 70% (last week) was preliminary as per CoreLogic report. Domain released updated results... now it is less than 65% for Sydney (rounded to 65%)
- CoreLogic reports the falling numbers almost every day. It's -0.54% YoY now. As comparison, it showed more than 10% YoY for Sydney more than 6 months ago.
- Reported to Listed ratio is lower than a year ago which is an indicator RE agents tend not to report. That happens usually when an auction failed.

Sydney Real Estate Auction Results
SQM Research - Total Property Listings
CoreLogic Home Value Index - Daily Indices | CoreLogic

Taking into account above facts, I would say the market is balanced rather than strong.

 

Data analysis wise, this means nothing significant. Auction volumes are about the same as they were last year, and clearance rates are notably lower than last year (however as I discussed the other day, that doesn't necessarily mean anything, as auction clearance rates were at their highest when Sydney growth was in the single digits, and auction clearance rates then dropped about 10%, as price growth hit a record 20%. Auction clearance rates are extremely loosely connected with a positive or negative growth direction at best, and often go in the opposite direction for many months).

None of the above is evidence of a market "performing well" (or badly). It is evidence of a market performing somewhat (though not massively) down from last year in terms of auction clearances (year to year trends being really the only useful way to interpret auction clearance rates), which may or may not mean anything.

Clearance rates just have too many variables to be helpful.

They are statistical clickbait, fawned over by property sites because they are a weekly publication and clearly get some people lathering over the very slightest percentage change week to week, but their usefulness is extremely limited.

One example of a serious methodological problem is that they can't account for changes in auction popularity. According to CoreLogic, there has been a 23% increase in Sydney listings overall year on year, which is a huge (and actually concerning) jump. It seems, given that this hasn't translated to volumes at auction being up on last year, agents may be managing expectations and discouraging auctions. This may also be skewing auction clearance rates, as there may be a new bias in agents only choosing properties most likely to sell to go to auction in the first place, which is yet another example of why this statistic is too prone to variability to mean much.

Some cities with very low clearance rates one week may also have high clearance rates next week due to low auction volumes (looking at Perth and Adelaide in this reference). Cities with low auction clearances can be doing well. Another big issue is seasonality. At certain times of the year, Feb included, there is always a sharp spike in auction clearance rates due to lull in preceding months (property is an incredibly seasonal game). But this happens every year. Rates going up now is expected, and doesn't mean Sydney is "stronger" than a few weeks ago. It doesn't mean anything. You'd have to compare the rise to the previous Feb, or preferably several years, for it to even begin to mean anything.

The so-called "surge" in auction volumes is equally meaningless, and has been repeated in several previous years in Feb, a popular selling season. It's actually down a little on last year. But it's "surging" on last week because that literally happens every year. It's not impressive. It's not a "surge", it's run of the mill.

FHB lending activity is interesting, but is it actually increasing or is it merely increasing as a portion of the market (a different thing which, in the current lending environment, makes a lot more sense)?

 

Well, the data presented is by Corelogic and how you interpret it is obviously your choice.

If you think I am posting this because I believe Sydney will continue the same level of price rise as before, I have already said that would be unsustainable.

I believe a balanced and logical view is 2% to 3% yearly growth for Sydney land between now and the foreseeable future (5 to 10 years).

This means there will not be a correction and therefore Sydney land is a safe asset but it also means that we are not going to see the 10% to 15% increase either.

As for the data presented, if you have good auction results or at least withing acceptable realms, then it means property is doing well and certainly is not going backward as some had obsessively predicted.

Whats interesting is that the riskier realestate being apartments are actually selling and not only that, they sell better than land.

Many had expressed concern that Sydney may have an oversupply issue similar to that of Brisbane, well it doesn't look likely.

 

It's not choice or interpretations... it is fact and logic. If the data has been changed, then conclusion (based on that data) has to be reviewed - it's 5% difference(!) which moves conclusion from 'strong' to 'balanced' / 'average'

CoreLogic report was released on 26/02 (Monday) when they didn't have final results - see below.

Auction Volumes Surge Past 3,000 For The First Time This Year

and compare it with today's Domain results (link is provided above)

 

Auction clearance rates aren't price growth stats, though, they just aren't. Price growth of 2-3% in Sydney would be nice, yes, but that isn't happening. Price growth is already 3-4% lower than that "ideal range" of yours now, and price growth has dropped from 20% to -1% in less than a year. A normal seasonal shift in auction clearance rates (well down on last year anyway) is not going to determine the future direction of prices.

Sydney is very much on the fence right now. The rate of growth has been falling since early 2016. Growth has only just dipped into the negative, but it is part of that same gradual slide (remember it's a rolling median so if you get high growth in one quarter, then stall for three, it takes many months for growth to level out). Sydney has been trending down for a year.

By 'on the fence' I'm not saying it's going up or down in the future. I don't know that. I think it's far too early to be sure where prices will go. But the fact remains, half of Sydney has made an annual loss. There is no other way to spin that.

And people need to make rational decisions based on data that actually can impact growth. I think you're perhaps finding false hope in poring over slight week-to-week shifts in auction clearance rates. I'm not "interpreting" it; this is data. There's just not much wiggle room on what it can mean and what it can't. And no one can interpret the statistic we're discussing into meaning what it doesn't.

If the market does continue dropping, and you're looking at auction clearance rates thinking you're a-ok, then there's a risk you could miss something. It's the data equivalent of going to see a homeopath. That's all I'm saying. I'm not trying to "talk Sydney down" or dissuade you personally from investing, or telling you your individual investments aren't going to work by mere virtue of being in Sydney. I'm just trying to give you a realistic view of what the data means mathematically, and what its very significant limitations are.

Auction clearance rates also can't tell you a thing about oversupply. Most of that argument is based on vacancies in the census (more than 11%), on a disparity between stock offerings and recent sales in certain areas, and on high housing starts and construction rates. Oversupply though is what you'd call a much more iffy statistic. It's very hard to predict with accuracy because it relies on forecasting population, construction and purchaser sentiment months in advance. That's why in Ireland it more or less snuck up on everyone. The oversupply wasn't a certainty till suddenly no one wanted to buy anything and the market was flooded. No one can really be sure there's an oversupply, which is why so many experts disagree. That's an example of data open to a lot of interpretation. Auction clearance rates? Not so much.

 

Ignorance is bliss....vested interest...the same as all the other diatribe based on narrow view.

Some people have never seen ine cycle

 

Clerance ratea do have a correlation in my opinion to price rise/ falls activity and are backed up to show a very cleare correlation.
At some point we all have to accept their will be Members who believe one thing and members who believe polar opposites.

Although what is annoying is th arrogance of members who are convinced they are right and write page long essay explaining the other member is an idiot.

Sometimes if you dont agree walk away.

Very few members here are. On BRW rixh list if any but the authority of the post would beg that.

 

Ok. Let's look into specific city - Sydney.



Correlation means you can find some dependency between the values. It may look first they're correlated... but you can't predict / calculate anything.

Let's check first if a specific value of Clearance Rate (CR) can predict the value of House Price Growth (HPG) at the same time point. Take CR = 65% (latest CR) and check HPG values for the last 10 years.

CR vs HPG
65% --> 2%
65% --> 5%
65% --> -7%
65% --> -2%
65% --> 13%
... and so on. Conclusion: HPG cannot be derived from CR for the same time point.

Let's now check if CR can predict future HPG. For example 6 months in the future:

CR vs HPG (after 6 months)
65% --> 5%
65% --> 5%
65% --> 12%
65% --> 8%
65% --> 8%
65% --> 2%
65% --> -0.5% Conclusion: future HPG cannot be derived from CR.

Another comparison - inverse dependence: today YoY is 0%. So according to the chart, CR:
55%, or 70% or 65%

 

Ok, I'm sorry you find me "arrogant", or that you feel like an idiot when people take the time to explain mathematical or statistical realities to you, but you literally proved my entire point with that graph you're attempting to use. So here's another one of those page long essays you apparently don't comprehend. Not that it's necessary, because guess what?

Your graph clearly shows the correlation is very loose.

On the graph, at different times there is a big discrepancy between clearance rate movements and price movements. Notice they sometimes they move completely opposite directions for months on end? While you were attacking other posters, did you actually stop to look at the graph?

The variables are indeed very roughly correlated, but that also does not necessarily indicate a causal relationship (i.e. it doesn't mean that where one goes the other will follow), and doesn't justify the obsession with touting very slight movements in auction clearance rates week on week as "improvements in the market".

As your graph clearly shows, it would be several months before you could be sure any such movement meant anything at all, even if the correlation was causative. And that is something I have attempted to quite patiently explain to you on several occasions. I've repeatedly pointed out slight auction clearance rate movements mean nothing.

I have never called you an idiot. I'm sorry you find the mathematics of all this inconvenient in that it doesn't support your preferred conclusion that everyone will keep buying dreck assets in outer Sydney suburbia, but I don't even think you're an idiot. Which is why I write these posts: I am genuinely trying to be helpful to you.

Two things on a graph aren't necessarily related just because they move in roughly the same direction.

For one thing, that isn't a clear correlation (on the graph) if you have any idea what you're looking at or look beyond the most absurdly superficial assessment (I mean there is an entire month on that graph you posted where clearance rates and prices are moving in the opposite direction).

For another, there may be something entirely unrepresented here causing the lose connection effecting BOTH variables (which as they obviously move independently at times, is overwhelmingly likely). It could be auction popularity. It could be something else influencing both. It could be that both auction clearance rates and prices are seasonally influenced.

It could also be that one eventually may affect the direction of the other (though there's a lot in the graph to disprove that conclusion), but that relationship is more likely to be strong price growth driving higher clearance rates and NOT the other way around. This is probably the case: sharp price growth causes auction popularity to rise, and more properties to sell at auction, but to suggest a couple of weeks of 1-2% higher auction clearance rates heralds the return of a strong market is complete and utter nonsense. It doesn't rule it out, but it certainly doesn't indicate it either.

Again, clearance rates also always jump in Feb. They have in every year in a decade. The numbers in your graph does not support the conclusions you're drawing, or the conspiracy against you you're imagining, so stop acting like a victim. The numbers aren't picking on you, they are what they are. There's no "opinion" needed. It's plainly obvious on the graph YOU posted that slight rises in clearance rates are not predictive of price rises. You've proven that exact point.

As I said last week I'm not going through these things to annoy you. I actually think it would be helpful for you to understand these relationships so you can look at things that ARE likely to influence prices, like economic fundamentals (supply, population growth etc).

 

58% cleared for Sydney (10/03)... another evidence of unimportance of clearance rates to assess the market conditions.

As always and expected, clearance rates were significantly reduced on Tue (compared to Sat) once they got more reports from RE agents. Media resources for some reason ignore that delay and report good results based on preliminary and incorrect data. I asked one news reporter if they're aware the published results are incorrect, and they replied 'yes'.

 

It still wont mean you can buy a place in inner-west of Sydney at a significantly reduced price.

So you have gone to all the trouble for no real results

 

...and it still won't mean you can't. That is not about whether the market is falling or growing, my posts in this topic are only about fake news (manipulations) reported by media and incorect conclusions (based on that news) by some forum members.

true and unbiased data is important for an investor. That affects decisions and outcome. I was correct many months ago about coming correction/cooling for Sydney, so my strategy to hold for existing properties and invest into other high perfoming markets was correct for me. Once the situation is changed, I can quickly move the capital from those markets to RE.

Now I can buy the same properties with lower or same price (depends on suburb) compared to what was a year ago. Meantime, the capital has grown, so I can buy more now.

(I'm not discussing here renovations / building duplex / buying undervalued properties / etc which could be profitable even when the overal market falls)