AquAsia financial strategist, Mark Bayley, has continued last week’s attack on auction statistics in today’s AFR:
With so many auctions results that aren’t recorded, should so much credence be given to these calculated clearance rates? At the moment, these clearance rates are not only used by homebuyers and vendors but also heavily referenced by the RBA, banks’ analysts and the media.
To improve transparency in this area, the two-fold solution is very simple.
Firstly, there should be mandatory reporting of all scheduled auction results by real estate agents. To ensure that this occurs in practice, a full list of auctions should be published on Friday. The main data collectors must know what these are because they come up with a figure of 789 (or whatever it is) auctions are scheduled.
Then on Sunday or later in the week, when the results have been collected, the same list should be published with all the results, including those that were withdrawn or postponed.
Secondly, the real auction clearance rate should be calculated using the scheduled number of auctions as the denominator and not, as happens now, just the reported number. As shown previously, the latter method is highly prone to manipulation and inherently gives an inflated clearance rate.
Even if mandatory reporting was not required, the final published list of auctions should also contain those properties where no results have been reported. If an auction result is not known, it should be not be excluded from the data.
All fair enough reforms in my view, and similar to those which I suggested last week.
That said, there are much bigger fish to fry than auction statistics, including: fixing the constipated land supply/planning process; reforming taxation arrangements (e.g. negative gearing and upfront charges on new developments); and implementing macro-prudential controls on high risk mortgage lending. Reforms in these areas would do way more for potential buyers, addressing the problem – unaffordable housing and speculation – at its source.
