The Effect of Low Auction Clearance Rates on Rental Demand in Sydney

Sydney is a wonderful place to buy property and rent it out to other people or sell it. However, sometimes the rental demand might increase while at other times you won’t be able to find any tenants.

Low auction clearance rates have an effect on the rental demand in Sydney. Let’s discuss the definition of a clearance rate before we move on to the main theme of this article.

Understanding Clearance Rate

A clearance rate is a major element of the property market. A low or high clearance rate tells if the market is favourable for the buyer or the seller. These rates are expressed as percentages and denote how many properties are at auction which are either sold or cleared.

A high clearance rate, between 75 to 80 % shows that the market is favourable for the sellers. It indicates that the available housing stock is low and the buyer demand is high.

On the other hand, a low clearance rate (almost 60 %) shows that the market is favourable for the buyers. It indicates that the house prices are declining and there is a low auction interest.

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Housing Demand in Sydney Was Strong

Two years back in 2016, the demand for houses in Sydney was booming. Auction clearance rates as high as up to 84 % were also set.  Almost 7 million dollars were paid for a four-bedroom house that was sold in auction. However, this meant that banking regulator APRA would make lenders to tighten credit to investors.

At that time, high auction clearance rates meant that the sellers could take any price that they wanted. Buyers were willing to buy properties at high prices.

Auction Clearance Rates Have Now Dropped in Sydney

Every region in Sydney is affected by the latest tightened lending restrictions. This has caused a huge increase in housing supply. Last year, home owners could sell anything with a roof over it. Now, they are trying hard to sell houses even built in prime locations.

Recently, auction clearance rates in Sydney have undergone various changes. These changes mainly range from 51 to 63 %.

The low auction clearance rates have made the market strong for the buyers. Buyers are looking for the cheapest possible options. On the other hand, renters are worriedly searching for new tenants.

Low Auction Clearance Rates and Rental Demand

With low auction clearance rates, the ball goes in the buyer’s court. The home owners are forced to sell their houses on low prices and the buyers are happy to purchase on low prices.

Even big properties with proper fences and a huge garden are being sold on low prices in Sydney. The case was quite different two years back. In 2016, even small properties were highly valued. Now, the rental demand has gone down due to the low

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