What the clearance rate means for the property market

Written by realestateview.com.au in Auction on October 14, 2016

When you’re preparing to buy or sell a property, you’ll come across plenty of industry lingo that you may not be familiar with.

LVR (loan to value ratio), DOM (days on market), ACR (auction clearance rate): these are all acronyms that those in the biz toss around every day.

But if you’re new to the property world and your real estate agent brings up one of these terms in casual conversation, it can be confusing to understand what they really mean.

So, consider this your premier briefing on the property acronym ACR, also known as an auction clearance rate.

What is an auction clearance rate?

In simple terms, an auction clearance rate is a percentage that signifies the total number of properties sold, or ‘cleared’, at auction for the previous week or month.

If 100 homes were up for auction and 80 sold under the hammer, the ACR would be 80%.

Now, you might be wondering: is there any reason why you should be paying attention to auction clearance rates, even if you have no intention of buying or selling at auction?

After all, why does it matter if auction sales are through the roof in your area, when you would actually be willing to book yourself in for a root canal rather than put yourself through the stress of bidding at auction, or listing your property for sale in this manner?

You may not think auctions results are relevant to you – but the truth is, the ACR matters for everyone. This is because in many respects, it serves a gauge of the broader property market for the area.

A low ACR means…

The market is slow.

Generally, a low clearance rate suggests low demand and a slowing property market. It may indicate that the area is over-supplied with property stock and/or is experiencing declining demand, meaning the market may be moving in favour of buyers.

If you’re in the market to purchase, this presents an ideal opportunity to negotiate hard on price, as you’ll be spoilt for choice. Vendors, meanwhile, will need to set realistic price expectations in recognition that there are more properties for sale than there are buyers to purchase them.

Case in point: in the downtrodden property market of Perth, during the first week of October 2016, the ACR was just 45.5% with only 14 sales at auction recorded.*

A high ACR means…

The market is thriving.

A high clearance rate might even be considered a hot market for sellers, indicating strong buyer interest and a bottleneck of available housing stock to meet demand.

Case in point: in Sydney during the first week of October 2016, the ACR peaked at a whopping 82.5%.* This represents a remarkably robust market, though one that is not quite as strong as it was during the boom of 2015.

Keen to know the ACR in your local area? To review our comprehensive data on recent auction results, searchable at a suburb level, click here.

Source: * CoreLogic