Higher auction prices linked to sunshine

Sunny days can boost auction prices by more than $11,000, according to new research showing a link between the weather and how much buyers are willing to pay.

The sale price of more than 800,000 Sydney properties between 2000-2014 was compared with corresponding weather data from the Bureau of Meteorology in the University of Technology Sydney study.

Auction prices were compared with factors including temperature, rainfall and solar exposure, as well as consumer sentiment survey data.

A sunny day increased the price by 0.97 per cent, or nearly $11,500 based on the current median Sydney house price of $1.2 million.

Although the study was prompted by research from the US linking sunny weather and higher stock returns, Adrian Lee, a finance lecturer from the UTS business school, says the real estate findings surprised him.

“I didn’t think it would be so strong,” said Dr Lee, who co-authored the study with with real estate and finance Assistant Professor Maggie Hu from the Chinese University of Hong Kong business school

“The weather does have some effect on people and the price they’re willing to pay.

“It’s quite amazing – people are driven by weather despite this big decision.”

Dr Lee said the most dominant factor was whether it was sunny or cloudy, rather than the temperature or rain.

However, warmer days also resulted in higher auction prices than were achieved on cooler days, with the study showing that a day with a 10 degree higher maximum temperature led to a 0.64 per cent, or around $7,400, price increase.

Rain resulted in lower auction prices, around 0.17 per cent lower than on a clear day, or around $2050 less on the median Sydney house price.

The research found that auction prices were lower than average on a long weekend and close to public holidays, as less people attended.

Dr Lee says that while weather had no effect on private sales, emotional behaviour should be factored into auction prices.

“It’s not so easy to value property – you have to think of not only the cash flow, but the behaviour of people,” he said.

While the study looked at Sydney properties, Dr Lee hopes to look at data from other Australian cities, as well as Auckland, due to its rainy climate and increasing auction rates.

The study will be presented at a UTS finance research showcase later this month and at the American Real Estate and Urban Economics Association Conference in January next year.