Why Auction Clearance Rate is one of the best capital growth indicators

Michael Fuller

September 22, 2020

mins reading time

Are you stuck trying to decide exactly when and where to invest in property? Auction Clearance Rate statistics may be your answer.

Don’t worry, you're not alone in trying to pick the best locations from over 15,000 suburbs countrywide. There are countless stories of property buyers finding their property market research overly time consuming and (after fighting off the biased property spruikers) they buy on emotion, only to regret this later as their portfolio stalls on one or two properties and costs them each month in negative gearing.

But there is a different way to pick the best areas for your budget using a proven method that relies on hard facts and very smart data-driven research technology. And it’s free.

It all starts with 8 powerful property market indicators that, together, calculate the gap in supply and demand (and therefore capital growth potential in every suburb) for you so you can get back to spending time with your friends and family knowing your property investment portfolio is working hard for you and not the other way around.

Let’s examine one of these 8 powerful property market indicators… Auction Clearance Rate.

(You can read the whole blog series by using the links in the adjacent '8 Supply-Demand Indicators' block)

What is Auction Clearance Rate?

Auction Clearance Rate is the percentage of auctioned properties that actually sell by auction in a particular suburb. For example, if 20 properties were up for auction in a suburb and 15 sold at auction and 5 were passed in, then the Auction Clearance Rate would be 15 / 20 x 100 = 75%. 

Real estate agents will often sell properties by auction when the demand for properties is strong, as auctions allow potential buyers to outbid each other and push prices up. But not every property that goes to auction sells. The higher the Auction Clearance Rate percentage, the higher the demand for properties. Be sure to look further into the trends over time of the Auction Clearance Rate as an increase in the percentage of properties that sell at auction may indicate increasing demand to supply. 

Remember that properties can be passed in if the seller isn’t happy with the top price offered at auction or if the seller accepts an offer before auction or if the seller pulls the property off the market prior to auction.

Where you can get Auction Clearance Rate stats

Realestate.com.au and domain.com.au publish Auction Clearance Rate data on a weekly basis. As this data is published fairly frequently, it is often the earliest indicator of the state of the property market, and whether it is a buyers’ or sellers’ market.

Collating and comparing this data for 15,000 suburbs is obviously a challenge even for the Excel spreadsheet data scientist in all of us. 

Of course, we have made this easy for you with our free suburb research tool, Boomscore! Check the Auction Clearance Rate for 15,000+ suburbs split by units and houses in Boomscore’s Suburb Profiler. Who knows, if all the other indicators support a low Days on Market figure, then you may be the first to spot a suburb set to Boom.

BOOMSCORE - BIG DATA & ARTIFICIAL INTELLIGENCE (AI)

Big data and AI capability makes it possible for the Boomscore capital growth calculator to crunch the data for each of the 15,000 Australian property markets. A task few could do manually even if they knew how. Boomscore simply means you can now find safer locations where prices are most likely to increase faster. Over the past 10 years, Boomscore’s data algorithms have outperformed the ‘hotspot’ picks of some of the more recognised property market research gurus. In fact my (then) 6 year old daughter showed them how easily it’s done using just a few clicks on Boomscore (read how).

Boomscore rates every suburb (by house or unit) out of 100 based on how they perform across the 8 supply-demand indicators in this series. The higher the Boom Score, the more demand exceeds supply, which greatly increases the probability of property value rises in that location for that property type. Get Boomscore Free.

But be careful with Auction Clearance Rate ...

There are multiple factors that can affect the Auction Clearance Rate:

  • Interest rates, the season, sporting events and public holidays can all impact auction sales, so it is important to focus on the trends over time in the data for your chosen suburbs as these will inform whether you buy/sell or hold. 
  • Also look at the volume of properties that were for auction at the time. If there are lots of properties being sold at auction in an area over a long period of time then this is probably a desirable investment location. But if the Auction Clearance Rate is high and only a few properties are being sold at auction over a decent length of time this does not always indicate a boom market.

In closing ...

Property prices, and therefore capital growth potential, are influenced by a number of factors. If you understand these factors and how to work with the capital growth indicators available to you, then there is no reason why you can't find the best investment locations to suit your strategy.

There are 15,000 suburbs in Australia - that’s 30,000 property markets (if you take into account the Unit and House markets in each suburb). Despite what the macro property market is doing, there are always viable micro markets out there… and it may come down to one particular street in one particular suburb. In order to find these nugget suburbs you need to compare the data for all 15,000 suburbs (and 30,000 markets) against one another to rank order them and let the cream of the crop float to the surface. And to crunch the numbers you need to have a good understanding of the importance of the data and how to work with it to find or track your chosen suburbs.

If any of our blogs on the subject have peaked your interest, you can download our Free Ultimate Guide on How to Find Super Profitable Areas to Invest with Scientific Accuracy using Data Driven Insights, or attend our in-depth (but affordably priced) online property research training course (coming soon ~ register your interest now!).  And we encourage you to use Boomscore, our free tried and tested suburb ranking tool to get you started.

Read next blog: Stock on Market Percentage

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Michael Fuller, Creator of Boomscore

Michael Fuller

creator of boomscore & boomscore capital partners (previously hotspotcentral)

Michael initially created Boomscore to quickly determine the capital growth potential of a location including for his own development projects. He's on a mission to help every day Aussies invest without the usual 'expert bias' on where and when to buy real estate or the commission driven incentives obscuring sound advice.

 Michael is an expert contributor to various property investing and property development publications and shares his thoughts freely with his Boomscore subscribers.

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