Are Auction Clearance Rates Misleading Us?
Auction clearance rates are often treated like a magic window into the real estate market. Media outlets use them to proclaim the rise or fall of the entire property industry. Economists, banks, and even the Reserve Bank of Australia follow them closely.
But here’s the truth: these numbers are frequently overstated, inconsistent, and misunderstood. If you’re a property investor, you need to dig deeper than the headline numbers. Let’s explore what auction clearance rates really measure, how they’re calculated, and how you should interpret them.
Why Auction Clearance Rates Get So Much Attention
It’s easy to see why the media fixates on auction clearance rates. They’re:
- Released weekly
- Easy to digest
- Tied to visible activity (auctions feel like “events”)
- Central to the markets in Sydney and Melbourne
But here’s the issue—they represent only a sliver of the overall property market, and that sliver is highly skewed.
In fact, the areas with the most auctions (like Sydney’s Inner West or Melbourne’s Eastern Suburbs) represent a narrow, prestige-heavy portion of the housing landscape. What happens there doesn’t necessarily reflect what’s happening in Perth, Adelaide, or regional towns across Australia.
The Reality Behind the Numbers
Over the years, Australians have heard about so-called “nationwide booms” or “national downturns”—but more often than not, those headlines were based on what was happening in just two cities: Sydney and Melbourne.
That’s because auction sales dominate those markets. In the rest of the country, most properties are sold through private treaty, not under the hammer.
Roughly one-third of Australian residential property transactions occur through auctions. That means clearance rates, even when accurate, only offer insights into a subset of the market—and not always the most relevant one for your investment goals.
So What’s the Problem with Clearance Rates?
There are three big issues:
1. The Data Is Incomplete
Many auctions that don’t result in a sale are never reported. Real estate agents are more likely to submit results for successful sales than for failed ones.
2. The Definitions Vary
One group might report a sale made a week after the auction as part of that auction’s success. Others might not. Some include withdrawn listings, while others exclude them. There’s no consistent formula.
3. Preliminary vs Final Rates Differ
Early results reported over the weekend tend to be more optimistic. As more data comes in mid-week, rates are revised downward. The preliminary number is what makes the headlines—but it’s often inflated.
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How Clearance Rates Are Actually Calculated
Let’s look at one example from a typical data provider:
Clearance Rate = (Properties sold at auction + Properties sold before auction) ÷ (Total scheduled auctions – Auctions withdrawn)
Now, let’s define those terms:
- Sold under the hammer: A property is sold during the auction event.
- Sold prior: A buyer made an offer that was accepted before auction day.
- Sold after: Negotiations continued post-auction and eventually resulted in a sale.
- Passed in: No acceptable bid was received; the property was not sold.
- Withdrawn: The seller pulled the property before auction, often due to lack of interest.
This makes things complicated. For example, is a property sold a week after a failed auction still considered part of the clearance rate? Some data providers say yes. Others say no.
A Simpler Way to Think About It
If you’re not a data analyst or economist, here’s a simplified formula:
Clearance Rate = Number of Properties Sold ÷ Number of Auctions Held × 100
Sounds straightforward, right? Unfortunately, most organisations don’t use this formula. And they’re unlikely to standardise it, as doing so would make some look outdated or overly optimistic.
The key takeaway: treat reported clearance rates as a rough guide, not an absolute truth.
Public Misconceptions About Clearance Rates
Most home buyers or investors assume clearance rates represent properties sold at auction on the weekend.
Let’s test that assumption. Suppose:
- 200 auctions were scheduled
- Only 100 results were reported
- Of those, 50 properties sold
Should we say the clearance rate is 50 out of 200 (25%) or 50 out of 100 (50%)?
Most media outlets report the 50% number. That’s misleading, because it leaves out 100 properties—half the dataset!
Discrepancies in Reported Numbers
Even the number of total auctions on a given weekend can vary between sources. One publication may report 800 auctions; another might say 850. Why the discrepancy?
It comes down to reporting standards, timing, and which data is included or excluded. This inconsistency makes auction clearance rates unreliable as a standalone metric.
Why the Real vs Reported Rate Matters
It’s often said: “Garbage in, garbage out.”
If agents are only reporting sales that occurred and skipping the ones that passed in or were withdrawn, the clearance rate becomes artificially high.
Research has shown that actual clearance rates are often 12–15 percentage points lower than what’s publicly reported. That’s a significant gap—and enough to change your perception of the market.
What Do High Clearance Rates Really Mean?
A reported clearance rate of 75–80% is usually interpreted as a seller’s market—where demand exceeds supply, prices are rising, and buyers are competitive.
But remember:
- That rate might be based on only a portion of total sales
- It might include non-auction sales
- It might omit withdrawn or failed auctions
So, while high clearance rates may indicate strong market sentiment in auction-heavy areas, they’re not the full story.
Who Uses These Rates—and Why?
Clearance rates are widely used by:
- Media outlets to write market stories
- Real estate agents to boost marketing
- Developers to justify pricing
- Banks and the RBA as one of many market indicators
There’s a clear incentive to highlight positive data. But as investors, we need to filter out the noise.
How Investors Should Use Auction Clearance Rates
Clearance rates can still be helpful—if you understand their limitations.
Here’s how to use them wisely:
- Use them as one data point, not the whole picture
- Combine with other indicators like days on market, median price movement, stock levels, and vendor discounting
- Focus on the local context—clearance rates are far more relevant in Sydney’s Inner West than in a regional Queensland town
A Better Way to Analyse the Market
Rather than rely on clearance rates alone, use tools that give you multi-dimensional insights.
SuburbsFinder lets you:
- Filter 15,000+ suburbs using over 40 property data points
- Identify areas with strong capital growth and rental yield
- Pinpoint suburbs with:
- Median prices under $500k
- More than 8% annual capital growth
- More than 6% gross rental yield
- Vacancy rates under 3%
- Compare suburbs based on historical and current data
- Run feasibility studies on 5 properties simultaneously
This approach gives you a 360-degree view of your investment landscape—not a narrow slice based on auction results.
Don’t Be Fooled by the Headlines
Auction clearance rates are a tool—but they’re far from infallible. Relying on them as your sole measure of market health is like trying to navigate with half a map.
If you’re serious about property investing, you need to go beyond surface-level metrics. Use auction data with caution, and always combine it with objective, suburb-level analysis that gives a clearer picture of what’s really happening.
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