Auction clearance rates dominate the property and real estate news. Claims of soaring clearance rates are whipping the media and property pundits into a FOMO (Fear of Missing Out) frenzy. The public is being encouraged to cast doubt to the wind and get into the market because the property boom is back.
Auction Clearance Rate is the percentage of properties sold at auction on a particular week or month.
Published by Domain, who source their data from CoreLogic, and RealEstate.com.au, who source their data from REA Group, Auction Clearance Rates are influential in the decision making process of both buyers and sellers in housing markets. Anecdotally one might be dissuaded from proceeding with an auction, and the associated additional costs, if clearance rates were particularly low.
Industry sources, who wish to remain anonymous, have shared that they feel pressured to encourage their clients to pursue an auction and are often at the whim of the online advertising and data providers. It appears many real estate agents are frustrated with the duopoly that has emerged in the real estate advertising industry.
Several other anonymous tips from a frustrated member of the property industry prompted us to examine the methodology behind the Auction Clearances Rates; resulting in the “Faking Auction Clearances Rates” video, which was based on data from the 2nd of November 2019 and published on the 6th of November 2019.
Looking at the data it was found that Domain was ignoring unconfirmed results and assuming that the percentage established with their limited data set would be consistent with all of their data
Total Auctions The number of all auctions scheduled for the day, including those that were withdrawn from auction at the last minute. Confirmed Results The number of auction results confirmed. Sold Property sold under auction conditions, or prior to auction. Withdrawn Property did not go to auction. Passed in Property did not sell at auction. Unconfirmed Results Properties with no confirmed result.
While it is reasonable to continue a trend in data when information is missing, from a data analysis perspective, it ignores the bias for under-reporting. Underreporting of negative news by real estate agents and other involved parties potentially leads to inflated Auction Clearance Rate figures. Understandably sellers would rather not have their property identified as having failed to sell at auction due to the potential for negative market perception.
Our simple analysis based on the data publically available from the domain website found that the Auction clear might have been as low as 55% rather than the 77% advertised on the Domain website. This shocked some viewers who reached out to their contacts at Domain who have been unconfirmed as saying “Yes, it’s understated. But consistently understated so the trend is sound.” This is consistent with the contention that Domain is using data and statistical analysis techniques without consideration or concern for the persuasive influence of their data.
On the 7th of November 2019, Domain revised their clearance rate based on updated confirmed results, but still assumed that the unconfirmed results were consistent with the newly revised data.
The revised Auction Clearance rate, now lower, was given little notice as the media prepared for another weekend of Auctions and Real Estate advertising. Following on from this adjustment we reviewed the data and argued that Domain should provide worst-case and best-case percentages with any data they publish to provide the public with an appreciation of the potential variation in the rate, as shown by the tabled below.
|Advertised Clearance Rate||74%|
|Sold + Unconfirmed||590|
This still left 141 unconfirmed auction results which Domain should have been able to resolve, particularly if the same property (based on the address) had been listed for normal sale following the scheduled auction. This left the potential the many properties that should have been recorded as “passed-in” simply being left as “unconfirmed” and the inflated Auction Clearance rate left unrevised.
While Domain provides the listing for all of the Sold, Withdrawn or Passed In properties in conjunction with the Auction clearance rates they do not provide listings of the Unconfirmed properties. Essentially making it difficult for anyone to easily check the actual clearance rate.
To address this discrepancy in the Auction Clearance a call was made to viewers of HeiseSays for help souring data for all planned Auctions. With this data, it would be easier to identify the Unconfirmed properties
Exposing the Data
Keith Almedia, from Fresh Canvas, contacted Heise Says and provided the data and their analysis of the Auction Clearance Rates for the 16th of November 2019. Freash Canvas used a simple three-step method to determine the actual Auction Clearance Rate.
- Step One – Involved capturing the details of every Auction on the Friday before the Auction Day, giving us the Total Auctions list. This is necessary to capture the address data so any unconfirmed properties can be checked following the auctions.
- Step Two – Involved capturing the Auction Clearance Rate results published by Domain and then identifying any Unconfirmed Results based on the data gathered in step one. The process of elimination was necessary to determine the unlisted properties.
- Step Three – Involved Analysing the data to attempt to confirm the outcome of any properties with Unconfirmed Results. This involved check if the property was back on the market the following week and if it should have been considered Passed in.
The Auction Clearance Rate as advertised by Domain at 77% is based on the confirmed data that they make easily available, as demonstrated on the table below.
|Summary of Domain Results||Step One|
|Total NSW Auctions:||527|
|Total Unconfirmed Results:||261|
|Total Confirmed Sales:||210|
|Passed In / Withdrawn:||56|
|Auctions Clearance Rate (min)||40%|
|Auction Clearance Rate (Domain Method)||77%|
Following an analysis of the data by Fresh Canvas, a revised and significantly reduced Auction Clearance Rate for 61% as opposed to 77% is discovered.
|Fresh Canvas Analysis||Step Three|
|Total NSW Auctions:||527|
|Total Confirmed Sales||323|
|Passed In / Withdrawn / Relisted||206|
|Auction Clearance Rate (min)||61%|
A sample of some of the Unconfirmed properties that were cross-checked for re-listing at a later date clearly demonstrates that Domain has access to the information necessary to provide an accurate Auction Clearance Rate. Yet Domain has chosen not to check this information and make it very difficult for any interested parties to easily confirm their data.
|70 Lake Shore Drive, NORTH AVOCA NSW 2260||Unconfirmed||Relisted – For Sale|
|22 Bonnefin Road, HUNTERS HILL NSW 2110||Unconfirmed||Relisted – For Sale|
|37 Tunks Street, NORTHBRIDGE NSW 2063||Unconfirmed||Relisted – For Sale|
|17 Bruxner Place, DOONSIDE NSW 2767||Unconfirmed||Relisted – For Sale|
|20 Marjorie Street, ROSEVILLE NSW 2069||Unconfirmed||Relisted – For Sale|
Fresh Canvas has provided a copy of the data in a compressed excel file for everyone to explore and review. Please Download the Excell file here and check the data for yourself to understand how easy it would be for Domain to provide accurate data.
It is concerning that Domain are not accurately updating their Auction Clearance Rates to include cross-checked unconfirmed results. Particularly because they can easily identify a property that has previously been presented for Auction because the property address will always remain the same.
Given the current state of the economy and waning consumer confidence, it’s clear that any over-reporting of the Auction Clearance Rates would have a significant impact on the real-estate sector. Based on the information we have received, repeated phone tips and conflicting information in the news, we would recommend people remain extremely sceptical of any claims based on “high” Auction Clearance Rates.