Property wrap - $12,000 a square metre?
Property editor Simon Johanson looks at the highs and lows of another weekend of house sales.
Take a look at the auction results from around the country. We've also included some handy information to explain what they really mean.
Click below for the weekend's auction results
Source: APM
Interpreting Auction Results
By Matthew Bell
Auction result information can be a handy tool for watching the property market, but knowing what the numbers mean and how they are calculated is the key to success.
On any given weekend, a range of property industry bodies will publish auction clearance rates, which are never exactly the same. There are a number of the reasons behind these discrepancies.
Firstly, each body will adopt a slightly different geographic definition of the city the clearance rates refer to.
APM's auction activity data, including clearance rates that are published every Saturday evening, use the same definition as the Australian Bureau of Statistics for capital cities, that is, the Statistical Division.
Secondly, APM publishes results on Saturday evening, based on the majority sample collected on that day, for release across various publications on the Sunday, while the process of collecting results continues.
So by midweek, the final clearance rate (after all results have been collected) does differ from the Saturday reported figures, but not significantly.
Thirdly, and most importantly, there are differences in methodologies used in calculating the auction clearance rate.
Essentially, what the clearance rate aims to provide, are a snapshot of how demand and supply in the auction market is behaving and a leading indicator as to how the whole market is expected to perform.
In a very simply way, we want to know what percentage of properties listed for sale at auction are actually sold.
One of five things can happen to a property listed for auction. They can be;
a) Sold under the hammer at auction
b) Sold prior to auction
c) Sold after auction
d) Passed in
e) Withdrawn from auction
Including some or all of these five elements of auction activity in the calculation used will affect the reported clearance rate.
On the "top-line" of the clearance rate calculation, APM considers only those properties sold either prior or during the auction to be "sold" at auction.
Other bodies, including some state real estate groups, include those properties sold after auction in the total sold. This has the effect of producing a higher reported clearance rate.
On the "bottom-line", APM includes all reported auctions, even those listed auctions that are withdrawn prior to the scheduled auction time.
Once again, some other bodies don't include withdrawn auction in the bottom line of the formulae. This also has the effect of producing a higher reported clearance rate.
APM includes withdrawn auctions in the calculation to prevent any bias in the clearance rate caused by properties being withdrawn due to expectations it may not sell or fail to achieve an expected price.
APM's definition of the reported clearance rate is:
(Sold under the hammer + Sold prior)/ (All Sold + Passed In + Withdrawn).
This calculation will deliver the most conservative auction clearance rate amongst those reported in the mainstream media.
Matthew Bell is the economist for the Fairfax-owned Australian Property Monitors.
