Auction Clearance Rates In Sydney’s Inner City And Inner West

Over the past few months, auction clearance rates have been falling.

We explore why, and what it means if you’re looking to buy or sell in Sydney’s inner city and inner west.

What is an auction clearance rate and why does it matter?

As its name implies, the auction clearance rate measures the percentage of properties listed for auction that actually sell at auction, or before it.

As most properties listed for sale in our part of Sydney tend to be listed for auction, the clearance rate is considered a good guide for which direction the property market is headed. A high auction clearance rate tends to meet strong demand, limited supply and rising price, while a low auction clearance rate indicates the reverse.

But there are some limitations to using the auction clearance rate as a measure of where the property market is at. For starters, not all properties sell at auction. For some properties and, in some market conditions, your real estate agent may choose to sell by private treaty or even off-market. The auction clearance rate won’t pick up these sales.

Also, depending on who’s publishing the auction clearance rate and how they calculate it, some won’t capture any properties that sell after auction, even if it’s immediately after.

What is the auction clearance rate?

Take, for example, the week of 21 May.

On 21 May the Sydney-wide auction clearance rate stood at 64%, according to Domain. However, it needs to be remembered that this was election day, so fewer properties than usual went to market (just 335 across the whole city). For the three weeks prior to that, the auction clearance rate was reasonably steady at 54% on 14 May (from 815 properties), 53% on 7 May (from 579 properties) and 56% on 30 April (from 818 properties).

Another data provider, CoreLogic reported that on the weekend of 21 May the auction clearance rate in Sydney’s Inner West was 61% from (50 properties). On 14 May it was 68.5% (from 88 properties) and on 7 May it was 68.1% (from 60 properties).

So, all in all, our local area tends to be performing better than Sydney as a whole.

Why is the auction clearance lower?

At the height of 2021’s hot market, the Sydney-wide auction clearance rate peaked at over 90% and, here in the inner city and inner west, there were times it came close to 100%. This was unusual though and reflected the fact that strong buyer demand and few properties for sale meant prices were rising rapidly. After all, anything over 80% is usually considered a strong seller’s market.

Meanwhile, in an even market, the auction clearance rate tends to sit around 70%. Anything below that and it’s a buyer’s market.

The auction clearance rate has fallen below that number for many reasons. These include increased supply hitting the market (the number of listings is well up on 2021), rising interest rates, lower consumer and business confidence and tighter lending criteria and general wariness in the lead up to the federal election.

The lower rate is also simply the result of the previous hot market running out of steam as people found their buying limits.

But a lower auction clearance rate doesn’t mean the market is dire. We find that when rates drop to around 60% there is an adjustment period where the market recalibrates while buyers and sellers find their levels. That’s really what we’re seeing now.

Often a property doesn't sell at auction because sellers are worried about overpaying or vendors have unrealistic expectations about their property’s value. When both parties take the time to reconsider their positions, they negotiate and the property eventually sells.

What it means if you’re buying and selling in Sydney’s inner city and inner west

A market like the current one suits buyers more than a rising market because there is more available and There isn’t the same pressure to act fast that there is when the auction clearance rate is high.

But conditions such as these can also be the best in which to sell, especially if you’re an owner/occupier. That’s because you’ll generally have to move onto a new home and, like other buyers, you’ll have greater choice and more opportunities to find your perfect home.

At the same time, you’ll have locked in the big gains the market has made over the past year when you sell your current home - so long, of course, as you have reasonable expectations.

But act fast - we expect the Sydney market will find its level over the winter and that we’ll eventually return to clearance rates of between 70% and 75%.