Veteran property analyst Louis Christopher of SQM Research says official auction clearance rate data is masking the true state of the slowdown in Australia’s housing market, and argues the RBA must be careful when considering clearance rates in its interest rate decisions.
While official figures from Australian Property Monitors suggested the clearance rate in Sydney increased on the weekend from 60.7% to 63.2%, Christopher says the real clearance rate was more like 54% when unreported auctions results – particularly those sales campaigns that fail – are included.
Similarly, the Melbourne clearance rate was more like 62%, rather than the 66.5% reported by APM.
Christopher says all reporting bodies, which include private groups and real estate industry bodies, suffer from some level of reporting problems, such as including private treaty sales in auction data, counting houses sold weeks after an auction in the clearance rate and being unable to get auction results from agents.
Christopher’s “adjusted” clearance rate attempts to include unreported results, including the many properties that are failing to sell.
While data problems can make things hard from house hunters and investors, Christopher is more concerned about the impact on the Reserve Bank, which has specifically cited strong clearance rates in recent rate rise decisions.
“What makes it imperative now is that we know the RBA relies on these auction clearance rates,” he says.
“I would hate to think they are making interest rate decisions based on inaccurate data.”
Christopher says he started to notice an increase in unreported sales in April. When this data is taken in conjunction with the fall in housing finance data, he argues it is clear that the heat has come out of the market.
Adding further weight to this theory are recent comments from normally upbeat real estate agents that the number of auction bidders has fallen.
“When you get real estate agents stating that publically, you know something is happening,” Christopher says.
While he says there is no chance the Australian housing market is in line for some sort of massive correction, Christopher believes the RBA may have gone “a notch too far” with its latest rate rise.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
