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Auction clearance rates are down, but does that mean selling at auction in the current market is no longer a good idea?
WHEN THREE of the four houses on Channel 9’s hit property show The Block failed to sell at auction, it said a lot about the current state of the property market.
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To make matters worse, it is believed the show’s production company paid a combined $3.6 million at the height of the property boom for the four properties. So, each had to sell for around $900,000 for the company to break even.
This did happen, eventually, but with the three remaining houses all sold after the televised auction, it makes sense to question whether auctions currently favour vendors at all.
Should they avoid the temptation to sell their property at auction and instead look to sell privately?
Statistics from RP Data show auction clearance results have been consistently weak for the past 12 months, with rates across the major capital cities now hovering at around 50 per cent.
At the top of the market back in 2009, 80 per cent of properties were clearing at auction.
According to RP Data, the lowest clearance rate recorded during the year so far was 43 per cent in late April – just above the worst result recorded during the GFC when rates plummeted to as low as 42 per cent across the combined capital cities.
“Auction volumes have also fallen away during the year,” says RP Data’s research analyst, Cameron Kusher.
“Based on rough calculations, around 24 per cent of homes being sold in June were taken to auction while during the same period one year prior, the figure was up around 30 per cent.”
This figure would come as no surprise to many real estate agents.
According to a straw poll conducted recently by The Adviser’s sister publication Real Estate Business, more than 64 per cent of real estate agents believe private treaty is the most effective sales strategy for the current market.
Real Estate Institute of Australia chief executive Amanda Lynch says when the market is soft, it favours private treaties because they are more controlled and more predictable than auctions.
Auctions are generally more popular when markets are red hot because agents can count on a good crowd of bidders turning up.
In these circumstances, buyers frequently become emotional, bidding with their heart rather than their head – which can mean a windfall for the vendor and a buyer in need of a hefty loan.
