It’s time for the truth!
by Neil Jenman
READING TIME: APX 3.5 minutes
Auction clearance rates are lies. Pumped-up statistics. It doesn’t matter who’s sprouting them, auction clearance rates are deliberately false. They are so far from true as to be laughable.
And not just every now and again, all the time, week after week, year after year, the property industry encourages consumers to keep buying property regardless of the risks. Australia’s property consumers make the biggest financial decisions of their life based on deliberately false data.
Everyone, other than consumers, seems to be involved in promulgating this false data, especially with auction clearance rates. Not only does the real estate industry deceive the public into thinking the property market is better than the reality, it also misleads the public that auctions are the most successful method of selling property.
The truth is vastly different from what the industry tells the public and the media. Unfortunately, the deception is now more brazen than ever. If the same level of deception occurred in stock market data, serious prosecutions would occur. Many stockbrokers cannot believe the blatant deception in the real estate industry. “We’d go to gaol if we did what agents are doing,” said one stock broker.
The lies are the same every week, only the numbers differ. For example, last Saturday (September 7), in five cities (Sydney, Melbourne, Brisbane, Canberra and Adelaide), the difference between the industry released clearance rates and the truth averaged 47 per cent.
In Melbourne, there were 704 auctions of which 411 sold at auction. That’s a truthful clearance rate of 58 per cent. The industry claimed a clearance rate of 74 per cent.
In Sydney, there were 444 auctions of which 281 sold. A school child knows that’s a truthful clearance rate of 63 per cent. The industry claimed a clearance rate of 82 per cent.
In Brisbane, there were 61 auctions of which 26 sold at auction. That’s a truthful clearance rate of 43 per cent. The industry claimed a clearance rate of 65 per cent.
In Canberra, there were 40 auctions of which 22 sold. That’s a truthful clearance rate of 55 per cent. The industry claimed a clearance rate of 69 per cent.
And, in Adelaide, where the big real estate networks are trying to get auctions accepted amongst a generally conservative populace, there were 55 auctions with only 23 sold. The industry figures were then pumped up by 108 per cent and claimed to be 85 per cent. But, the truth of course, was less than half that figure at 41 per cent.
What is particularly disturbing about the widespread plague and acceptance of false figures is how “respectable” publications are now falling for the fraud. For instance, last Monday’s Australian Financial Review carried a front page story about how the “RBA’s cheap money is firing up property auctions”. The newspaper regurgitated the false figures from the real estate industry claiming that Sydney’s auction clearance rate for the previous Saturday (31 August) was 80 per cent when, in fact, it was just 56.4% per cent. The AFR reported: “in Melbourne 76 per cent of properties sold under the hammer”. Pure nonsense on the front page of a [once-trusted] newspaper. The truthful clearance rate of properties sold “under the hammer” in Melbourne was not 76 per cent, it was 58.6 per cent.
So, what is going on? There are two simple ways that this statistical fraud is perpetrated on the public by the real estate industry. First, most agents do not count auctions that fail to sell. They just ignore them; pretend they never happened. Yes, as incredible as it seems, they really do. It’d be the same if the airline industry refuses to include plane crashes in a safety study.
For example, the first main way the numbers are fudged is this: If there are a thousand auctions and 300 don’t get reported because they don’t sell, the industry just ignores those 300. Only the 700 properties that get reported are included in the statistics. If, say, 500 of those 700 were sold, the industry says that works out at 72 per cent (being 500 out of 700). They just expect everyone to ignore the fact that, in total, a thousand properties were put to auction and only 500 sold which is 50 per cent. No, instead they just fudge the numbers because the false number of 72 per cent looks so much better than the truth of 50 per cent. The real estate industry thinks it’s a great joke that newspapers report its false figures as gospel as do the Saturday evening television news bulletins.
The second major way that auction numbers are fudged is just as brazen. They simply count sales that are not made by auction as being made by auction. Someone buys a home under private treaty conditions and the agents throw that sale in with auction sales. Hundreds of non-auction sales are counted as auction sales.
So, where can consumers get the truth? How can you know what the market is doing? Well, if you want to see confirmation of what’s written in this article, go to one of the sites, such as Domain and look for the auction results. Be prepared for a big belly laugh when you click on the link that says “Help me understand these results” which translated means: “See how we fudge the figures.”
To calculate the TRUE auction clearance rates, there are only two numbers you need – first, the number of auctions held in a particular city and, second, the number of auction sales in that city. That’s it. Forget the other nonsense designed to bamboozle you. You are not stupid, so don’t let the industry treat you as stupid. If there are 100 auctions and 35 homes sell, that’s a 35 per cent clearance rate. Or, to give you an exact example, there were 55 auctions in Adelaide on Saturday and 23 sold. You don’t have to even reach for your calculator to know that 23 sales out of 55 auctions is not 85 per cent, not even close.
But, we’ll do it for you. Every week, we will look at the auction numbers (and where they came from). We will remove the deliberate red-herrings and give you, the Australian public, what you deserve – the TRUTH.
So, if you are interested in knowing the TRUE Auction Clearance Rates, you will be able to find them on this website.
So, again, let’s release the truth from last Saturday, September 6, 2019.
Here, again, are the TRUTHFUL AUCTION CLEARANCE RATES in BOLD with the FALSE industry figures (in brackets) beside the truth:
SYDNEY – TRUTH 63% (82%)
MELBOURNE – TRUTH 58% (74%)
BRISBANE – TRUTH 43% (65%)
CANBERRA – TRUTH 55% (69%)
ADELAIDE – TRUTH 41% (85%)
Thanks you for reading this article. If you can offer your support in any way, such as lobbying the Australian Competition and Consumer Commission and strongly ask that the real estate industry is forced to disclose truthful figures just as many industries do.
And, to you agents, if you want to be respected instead of being near the bottom in surveys of trusted professions, support the truth. Start helping the public instead of harming them. And to those agents who just hurl abuse, try and remember something: Your potential customers are watching you making a fool of yourselves as you strive to defend the indefensible.
Do what’s best for your clients and you’ll attract more clients. Try it. You’ll be surprised how removing deception from your business life increases the sales in your life. And isn’t that what you want? More sales? Of course it is. Well, act with integrity and watch what happens.
PLEASE NOTE: Our focus is upon helping consumers. Abuse from agents on our web site or Facebook page will be deleted or ignored or well publicised – it depends on our mood.
But one thing will never vary: No matter how much we are abused or threatened we will never stop doing what we love most – helping honest consumers to get the best deal possible in real estate. And, of course, if any agents are serious about taking care of consumers, we’d love to help you too. Thank you.