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Apart from on NRL and AFL finals weekends, auction numbers are regularly topping 2,000 with clearance rates above 70 per cent. It’s clear the spring selling season is in full swing as prospective buyers flock to the very unique Australian drama of homes going under the hammer.
For those from outside Australia, they are certainly an eye-opener.
New Domain boss Andy Florence, whose US-based CoStar property data empire bought the Australian listings portal for $2.8 billion earlier this year, admitted being amazed by the experience.
So much so he made 18 of his global executives attend one while on a fact-finding mission. But how important are they?
The actual number of properties on the market stood at 239,044 in August, dwarfing the 10,000 or so properties being pushed through the high-pressured pitches
By Lewis Panther
§ Auctions open the door on data that even the RBA watches
Despite amounting to just a fraction of homes on the market, properties that go under the hammer are a gold mine of data, according to auctioneer Clarence White
Homes going under the hammer can have a double-whammy benefit – boosting the price for sellers while being transparent for buyers.
That’s the verdict of leading auctioneer Clarence White, whose clutch of awards includes being the 2022 Australasian Auctioneering Champion.
The Sydney-based auctioneer, whose business books around 2,200 a year, also explains why they are more than just theatre and are in fact a barometer of the real estate market.
Despite the fact there are a quarter of a million homes on the market on any given week, it’s always the 2,500 auctions around the country that get the airtime.
“When you put competitive people in a room at an auction, it’s interesting because it is a live theatrical forum,” White says. “People like to come and watch. All the neighbours are interested to know what their home could be worth. It’s natural.”
Noting the RBA’s own use of auction clearance rates in analysing the market, he adds: “It’s a great barometer because of what it tells you about competition. When you look at a private treaty sale, it may have sold in 14 days at a certain price. That’s one set of statistics. If you looked at just purely the auction statistics you would see more. When you go to an auction that can be one better. At auction where there’s been 16 people competing on the auction floor, belting it out to a max price, you get a sense of the competition in the market. If there are a lot of bidders, that also says things about liquidity and about borrowing capacity of buyers - about confidence in that market as well so you know it is a great barometer of a lot of things in real estate.”
While auctions are more prominent in well-heeled suburbs and are aimed at maximising the price for the seller, their transparent nature means buyers also have a true picture. And auctions do not always favour the seller, White says.
“Obviously the seller is doing it to try and maximise price. There’s no question about that, but it depends how it goes,” he says.
“Auctions come in all shapes and sizes – and sometimes auction day can be a good day for buyers. “The campaign might have not gone as well as the seller hoped, and there might be an opportunity to buy well.
“The advantage for the buyer is that it’s a transparent way to purchase. You can see what everybody else is willing to pay - which is one of the challenges of buying in private treaties. You don’t really know what others are offering.” up and down the east coast during the month.
Yet they have a significant hold on market sentiment, with even the Reserve Bank using clearance rates as a barometer in its forecasting toolkit.
It’s the auction numbers that make the hot-off-the-press headlines on Saturday evenings – out almost as quick as the footy scores.
For under-the-pump conveyancers they are yet another part of the juggling act at the heart of running a business.
“For us as your conveyancers, the lead-up to an auction is an intense period that requires significantly more work than a standard sale,” says Julian Silva, of Flash Conveyancing.
“We often field inquiries and negotiate contract amendments for multiple prospective buyers – sometimes 10 or more.
“Each request requires us to carefully explain the legal risks and consequences.”
Like Silva, All Hours Property owner and AICVIC President Shakila Maclean sees the benefit of auctions, but is also well-aware of the pitfalls.
“From the conveyancer’s perspective, auctions are a mixed bag,” she says.
“They generate buzz and can speed up transactions, but they also create pressure as timelines are compressed.
“Purchasers are often making huge financial decisions under emotional strain.
“As a conveyancer, acting for a purchase means ensuring disclosure is complete, advice is crystal clear, building and pest inspections are complete, finance is pre- approved and clients are prepared before they even raise a hand to bid.”
While auctions are part of the spectacle of Australian property, they’re not the whole story.
With hundreds of thousands of properties quietly listed and sold via private treaty, auctions can sometimes overshadow the day-to-day reality of conveyancing, says Shakila.
“They’re loud, high-stakes moments, but in the bigger picture they’re just one way property changes hands,” she says.
For Angie Nguyen, owner of Convey Property Settlements, preparation and all the right due diligence is key, especially as there is no cooling-off period.
But the AICSA and national AIC representative has noticed a trend creeping in that can cause problems.
“More buyers are bidding and signing without their finance actually in place,” she says.
“The clue? A request for a long settlement [90 days or more]. From my experience, developers are the usual suspects here.
“As a conveyancer, that’s a red flag. The contract might be unconditional, but if finance isn’t sorted, things can unravel very quickly.”
Another worrying trend is clients wanting to bid at auction before selling their own home.
The challenge is that an auction contract cannot be subject to the sale of an existing property.
“This can put buyers in a tricky spot, often scrambling for bridging finance,” she says. “And if a property is passed in, negotiations that follow may still require the purchaser to waive cooling-off rights and sign under auction conditions.”
When acting for sellers, ensuring finance pre-approval is in place, and recommending building and pest inspections are done before auction day is crucial.
“It’s about helping clients know their obligations under the contract so they can bid with confidence,” she says.
Domain chief economist Dr Nicola Powell has witnessed the rising popularity of auctions. “People are addicted to attending them and love knowing what the weekly clearance rate is,” she says.
While they’re concentrated on Sydney and Melbourne and tend to be in the higher price range, the property expert does see them as a “barometer of buyer and seller sentiment.”
“Clearance rate really does give an indication of whether sellers are meeting buyers,” she says.
“Buyers are finding a very competitive market and there’s been analysis by the RBA showing that a clearance rate below 60 per cent really meant a buyers’ market.
“A price above 60 per cent shows that prices are going to rise. When you get to an 80 per cent clearance rate, that’s when the market is just so heated you know that is FOMO [fear of missing out] at its best.”