Auctions versus private treaty: the debate over the right listing decision
Property auctions have lost their lustre, with falling clearance rates contributing to a pall over the market.
The decline in clearance rates has been accompanied by a rise in poorer voluntary reporting of results.
Some 20% of Melbourne’s auctions results now come with the price marked ''undisclosed'' – a significant increase from last year when it was sitting at about half that level.
A recent survey also revealed that 43% of properties scheduled for auction in June had no published price range, frustrating buyers' attempts to obtain basic listing information, according to The Age.
The same trend has not been as evident in the reporting of Sydney results.
Not that long ago, houses were selling for prices undreamed of with many already-inflated reserves being topped by thousands of dollars as frenzied purchasers bid for what they believed to be their last chance of acquiring a home.
The lowest clearance rates in Melbourne have been in Sunshine North, with just a 42% success rate over the past year, according to APM, along with Highton, at 44%, and Sunshine West, at 46%.
In the first six months of the year, according to the REIV, Melbourne clearance rates city-wide 59%, with four suburbs having a success rate of more than 80%, led by Chadstone with 86% of auctions resulting in a sale. Windsor's clearance rate was 82%; Abbotsford and Donvale were 81%.
The Sydney housing market remains relatively quiet, with auction clearance rates stabilising at levels consistent with the normally-subdued winter selling season, according to Andrew Wilson, the senior economist at Australian Property Monitors.
Recent data shows that while much of the Sydney property market has cooled, many suburbs in the inner-west have been well above the overall 55% Sydney clearance rate, including Enmore, Lilyfield and St Peters, which all achieved 80%-plus success rates.
But some suburbs lag considerably behind, including Church Point at 45% over the year to April, Darling Point at 43% and Yowie Bay with 44% success rate under the hammer.
The stark overall drop in clearance rates from the 70% and 80% of recent years coincides with the typical winter slowdown in auctions, so the reduction in stock might typically be expected to provide a floor for the clearance rate.
A recent Real Estate Business poll found 64% of 322 estate agent respondents indicated that private treaty was the most effective sales strategy in the current market.
But some agents argued that agents who were not actively embracing auctions in the current flat market were not being honest with their clients.
“As the price of properties fall, only the poor agents fall back to private treaty,” says Ray White Caloundra Group director Tom Garland.
“This type of agent shies away from the true, tough nature of our industry: the truth and brutal honesty. That truth is to be honest with our clients and give the news from potential buyers back to the seller as to what they believe properties [are] worth.”
Results this year show his Caloundra office has been clearing 79% of properties in 48 days through the auction process, while private treaty clearance is running at 18% on 121 days.
Ray White auctioneer in South Australia Rob Forde maintains auction in this market should be embraced, rather than feared.
“In a market with so many unknowns, auction is one of the few things that provides certainty to buyer and seller alike,” Mr Forde says.
General manager of sales at McGrath Estate Agents, Matt Lahood, says where there are not a lot of comparable sales, people are probably better off paying for an auction.
He says the decision could depend on the area, as some markets are less amenable to auctions. Larger properties, which can take longer to sell, might suit a private treaty sale.
"If it's a unique waterfront or something that's rare, you'd definitely auction it," Mr Lahood says.
