This week, we have gone deep on the market and the auction data to give you real insight into the conditions that are in play right now.
We read with interest as the week closed a headline in the AFR stating that auction clearance rates are expected to hit 40%, which is reportedly the lowest in years. While the Cotality data looks at national auction markets trending in the same direction, we continue to report that the most accurate auction data is from SQM Research.
The Sydney auction clearance rate is now on a 13-week run pegged between 30% and 40%. This is the longest sustained run of a clearance rate at this level we can recall, and it is a stretch far longer than the COVID window.
Flashback: The 2020 COVID benchmark
To illustrate the difference, we can look back at the start of the pandemic. On January 25, 2020, when the first COVID case in Australia was reported in Melbourne, the auction clearance rate was sitting at 63.24%. It was not until March 22 that the Government imposed national guidelines banning gatherings and effectively calling the first national lockdown.
Strangely, the auction clearance rate jumped to 69.05% by February 9 because Australians clearly thought this pandemic nonsense would blow over. Right up until the March 22 lockdown, the Sydney auction clearance rate remained above 50% as the market held while uncertainty was circling.
March 29, 2020 was when we saw the first major pullback and a reflection of how sentiment drives the market. The auction clearance rate fell from a high of 68% down to 34.29% on March 29. However, there were only five weeks of the clearance rate remaining in the 30% bracket, with an all-time low of 27% serving as the baseline. By May 10, the auction market was bouncing back and for the remainder of the year the market went through a steady period of near 50% clearance rates before moving back into the 60% bracket by spring.
The 2020 stimulus safety net
The rapid 2020 recovery was driven by unprecedented intervention. The cash rate had emergency cuts, dropping from 0.75% to 0.5% on March 3, 2020, again on March 19 down to 0.25%, and again on November 3 down to 0.1%.
On top of that, we had the Federal Government stimulus packages that had cash being handed out everywhere. That stimulus started on March 12, but it was JobKeeper that changed Australia's working landscape forever. Introduced on March 30, the $130 billion package was the largest stimulus package in Australian history with payments landing on May 4.
The key takeaway is that the 2020 market had just five weeks with a clearance rate below 40% before the stimulus and record low cash rates sent the property market rocketing for the next 18 months.
The 2026 reality: No safety net
Let us look at today's cycle. This year there were just two Saturdays in February that the auction clearance rate was above 50%, and through March the market started to decline. We have had three rate increases this year, moving to 3.85% on February 3, to 4.1% on March 17, and to 4.35% on May 6. We also had the Iran conflict kick off on February 28, causing global headlines to take a negative turn.
Ironically, just like back in 2020 when the COVID reaction landed in the market on March 29, it was the weekend of March 29 in 2026 that fell into the 30% window. On March 29, 2020, the auction clearance rate was 34.29%, and fast forward to March 29, 2026, the clearance rate was 38.48%.
Performance is similar on paper, but unlike 2020, there is no stimulus and there are no rate cuts. From March 29 until now, the final Sydney auction clearance rate has been hovering between 33% and 35% for 13 straight weeks, meaning we are stretching into day 100 of the market being in such a fragile position.
A market moving from FOMO to FOOP
Circling back to the media, when we see headlines predicting that the auction clearance rate could fall into the 40% bracket, that is simply poor headline news. The headlines and the data analysts do not have the real-world metrics in their calculations that we are seeing, hearing, and discussing with buyers every hour of every day.
We can see there are buyers looking to purchase. Many recognise the big shift in prices and think value is on offer but reading in the media that the market will get worse before it gets better has so many on their heels watching and waiting.
It is a standoff. Many sellers are willing to meet the market, which means the price gap between sellers and buyers is closing fast, but the market currently has a confidence issue. It is the complete opposite of FOMO, and we are now experiencing the fear of overpaying, or FOOP.
This is the cycle we are in, and there will be little to no change to these market metrics this year. It is best to massage around the edges, maintain a sound strategy, and move fast when you find interest on a property.
