Auction market boom: Clearance rates on track to six-year high
Crowded auctions are becoming the new norm, with a record percentage of homes sold under the hammer across Australia’s capital city markets.
In Sydney, nearly nine in 10 of properties put on auction were snagged over the weekend, according to preliminary data from Domain.
Adelaide and Canberra saw even higher preliminary clearance rates of 90% and 94% respectively.
“Adelaide and Canberra are doing really well this year because they haven’t been as affected by COVID and they’re also not so reliant on international students,” Mozo’s property expert, Steve Jovcevski explained.
“The other reason is that a lot of investors from Sydney and Melbourne have started to look interstate because they want value for money and want to take advantage of capital growth.”
REA Group said multiple homes attracted more than 20 bidders over the weekend and it was uncommon for prices to go hundreds of thousands of dollars above reserve.
For instance, one house in Bexley North, which had received an offer of $1.1 million in December, sold at auction on Saturday for $395,000 more.
The latest figures from property research group CoreLogic also indicate we’re in the midst of an auction boom. Capital cities recorded an average final clearance rate of 80% in the week ending 7 March - the highest we’ve seen in nearly six years (since the week ending 26 April 2015).
“The overarching factor for why this is all happening is because we’ve got record low interest rates,” Jovcevski said.
But unlike other moments in the past where the Reserve Bank has hiked up home loan interest rates to put a brake on rapid property price increases, this time they’ve done things a little differently: the RBA has said it will keep rates low until 2024 to help the economy recover from the pandemic.
“So [the RBA is] giving the market a lot of confidence to buy at a higher price because they know rates aren’t going to go up anytime soon,” Jovcevski said.
Top tips when bidding at an auction
With so many bidders in the market right now, having a successful auction day could come down to the right tactics and budget.
If you’re planning to partake in a house auction soon, here are a few tips to help you get ahead.
- Get loan pre-approval: To bid with confidence, you’ll need the bank on your side. Make sure you’ve gotten your finance sorted by getting your home loan pre-approved by your lender before the auction. Don’t forget to compare home loan rates to find the best deal for you! Pre-approval is useful because it helps you work out what your monthly repayments may be and set a suitable upper property price limit.
- Have an inspection done: Did you know that most apartment and house owners who purchased a new property in the past decade have experienced building defects, according to Mozo research? That’s why it pays to get a building inspection report done beforehand. If the property has problems such as leaks, cracks or defective plumbing, that might impact how much you’d be willing to pay.
- Know the terminology: If you’ve never attended an auction before, chances are you may not be familiar with the auctioneer’s calling technique and auction phrases like ‘grabbing the gavel’ and ‘vendor bid’. So it’s important that you do your research and brush up on those terms.
- Play the odd numbers game: Auctions can be highly stressful especially for a rookie but a simple tactic to throw off your competitors is to bid in odd numbers. Try calling out a few uneven figures - for instance, $762,246 instead of $762,000. But remember to write those numbers down in advance, so you don’t get confused yourself!
- Have your money ready: So you’ve had a successful bid? Congratulations! Before you get too excited though, don’t forget that you may have to pay a 10% deposit and sign a contract right after the auction, unless your lawyer has helped you negotiate a lower deposit amount.
For more bidding tips and tricks, check out our guide on how to beat the competition at the auction.