The Rise of Auctions26/04/2013
According to figures released by Australian Property Monitors, the number of houses scheduled for auction in Sydney continues to grow, with 360 houses and apartments going under the hammer in the last weekend of April. This is much higher than the 271 auctions recorded 12 months ago, with figures from the end of April much higher than the start, illustrating ongoing momentum. Auction clearance rates are also on the rise in Sydney, due to increasing competition and a growing acceptance of auctions among buyers.
The most recent Sydney auction clearance rate of 75.6 percent is the highest since April 2010, with the clearance rate in Melbourne also rising to 68 percent, the highest since May 2010. This situation is even more exaggerated across the Tasman in Auckland, where auction rates have been rising over the last year. In a record statistic released by the Real Estate Institute of New Zealand (REINZ), 1,793 houses sold by auction in March, representing 22 percent of all sales.
According to REINZ chief executive Helen O'Sullivan, rising auction figures are a sign of a "seller's market", a situation marked not only by an increase in buyers but a decrease in new listings over a significant period of time. "We have certainly found in Auckland that the auctions results are better than other types of sale. That won't always be the case. The big thing about Auckland is it's a seller's market at the moment." said O'Sullivan.
The industry and culture surrounding property auctions in Australasia is markedly different than in the U.S and many other countries, where auctions are frequently used to get rid of properties in times of financial trouble. In contrast, rising auction numbers in Australia and New Zealand are often a sign of a strengthening market, especially in competitive urban centres. A strong market can be bad news for buyers, however, with rising prices often exaggerated even more in auction sales.
Buyers are advised to remain cautious at auctions, with the initial under-quoting of properties an ongoing issue and the threat of bidding wars always prevalent. It is also important to remember that many real estate companies have a vested interest in auctions, and may receive extra money to list a property as an auction rather than a standard sale. Many buyers are also frustrated by the auction process itself, with unknown prices and inflexible conditions two of the major complaints.
While auctions are not suited for every type of property, and certainly not ideal for every segment of the market, the rise of auction listings and sales is a trend hard to ignore. With confidence high, interest rates low, and competition especially fierce in Sydney and Auckland, both Australia and New Zealand are shaping up for increased auction market performance in 2013.