Auction withdrawal has spiked to about eight times the usual rate and the clearance rate for the combined capital cities has reached record lows since on-site auctions and property inspections were banned in response to the COVID-19 crisis.
CoreLogic reports from the week ending 29 March to the week ending 3 May, the portion of scheduled auction events withdrawn averaged 45.8 per cent across the combined capital cities market.
The five-year average rate of withdrawn properties prior to COVID-19 was 5.7 per cent.
CoreLogic Head of Australian Research Eliza Owen said while withdrawn properties increased, the total number of scheduled auctions came down in the weeks after the nation-wide lockdown.
“This partially reflects vendors and agents adapting to the private treaty sale method, or adapting to online or over-the-phone auctions,” Ms Owen explained.
“As a result, the withdrawn rate has since come down to 26.4 per cent.”
She said the decline in auction volumes was also partly attributable to the Easter long weekend, which typically sees very low levels of listing, buying and selling activity.
According to CoreLogic, the clearance rate for the combined capital cities also reached a record low (excluding January results which are seasonally impacted) of 30.2 per cent in the week ending 19 April. This has since stabilised to 47.5 per cent for the week ending 3 May.
“The dramatic drop-off in the clearance rate was largely because CoreLogic counts a ‘withdrawn’ property as a non-sale,” Ms Owen said.
Meanwhile, 17.1 per cent of scheduled auctions were passing in after the on-site auction ban was introduced.
“Ultimately, most of the decline in the clearance rate can be explained through an engineered slowing of auctions.
“This is important to note, because clearance rates and changes in home values have historically been closely correlated.”
Ms Owen said at face value, the sharp fall in clearance rates implies housing values could follow a similar trend, however there is a good chance the relationship has at least temporarily disconnected due to the high withdrawal rate dragging the clearance rate to artificial lows.
As open inspections are gradually reintroduced across the country, and onsite auctions re-commence in NSW, Ms Owen said it was worth considering what impact, if any, this would have on the volume of transactions and price levels.
“CoreLogic estimates that the number of transactions has dropped about 40 per cent over April, while prices held relatively firm,” she said.
“Having multiple, potential buyers inspect property would increase productivity for agents, potentially enabling more stock to come to market.
“Public auctions may expose buyers to their competition, which in a market where prices are rising, could induce people to make higher bids and become more competitive.”
But in the current market, consumer confidence is still recovering and Ms Owen predicted prices are likely to start falling.
In Melbourne, where 46 per cent of all capital city auctions were held in the 2019 calendar year, values already showed a 0.3 per cent decline over April.
“This means the auction method of sale may be less popular with vendors and agents,” she said.
The easing of restrictions on auctions comes as the ABS reports that paid employment positions have fallen 7.5 per cent across Australia, and total wages paid has decreased 8.2 per cent.
“Ultimately, being able to look at property, and bid publicly on property, does not increase capacity to buy property,” Ms Owen said.
“The real estate industry is more likely to see a recovery when other sectors return to normal operations, and consumer sentiment lifts from its current lows.”