The Auction Advantage

It’s clear the property market has faced challenges in many regions across Australia over recent months. We’ve seen a significant reduction in the number of properties sold as well as price corrections, particularly in Sydney and Melbourne. Confidence is dented, not only among buyers and sellers but for many agents too. Particularly those who may not have worked through different cycles.

But despite the shift, many of our members are still getting strong sales outcomes for their vendors and maintaining their list-to-sale ratios. What makes them different?

Almost without exception, these agents are committed to the auction process, bringing structure, competition and accountability to their property marketing campaigns. A well executed auction campaign involves intense energy and promotion, creating maximum competition amongst as many buyers as possible. All of this work generates extensive buyer feedback during the campaign, providing a great picture of the current market interest for the vendor.

Auction day brings all parties together in the most transparent way possible, and gives confidence to a buyer by knowing that others find similar value in a particular property. It is then for the vendor to whether to accept or reject to highest offer available in the current market.

All of this is not just anecdotal.

Every Saturday afternoon we analyse our group’s weekly auction results - a significant sample size given we are responsible for 23.2% of all auctions listed across Australia and New Zealand.

We look at a range of metrics including properties withdrawn from auction, properties sold prior to auction day, properties sold post auction, number of bids per property and crowd sizes, as well as the auction-day clearance rates.

This gives us a significantly deeper view on buyer sentiment and the market environment than any of the data houses, who only collect the headline result - clearance rates.

While journalists and commentators are quick to give their opinions on this data, we assume to meet the demands of the news cycle, it’s unclear on what basis they form extrapolated market views.

More concerningly, we are horrified when the Reserve Bank use this one dimensional data set when discussing monetary rate policy settings.

We all know the market has softened. But all of these commentators are consistent in arguing that auction results are currently weak, with some even arguing that they give property owners a solid reason not to sell by auction.

Certainly there has been a reduction in auction day clearance rates compared to 2017 and early 2018, but from what we can see, auction results are generally in line with, or slightly above, long-term trends.

But even more importantly, the sale rate at 30, 60 and 90 days for properties marketed under the auction method over the past three months has been significantly higher in all regions compared to those marketed any other way - by up to three times!

For example, in Sydney, the Ray White auction clearance rate at 30 days is 48.1 per cent, while the private treaty sale rate is just 16.5 per cent. In Melbourne, the Ray White auction clearance rate at 30 days is currently 46 per cent, while the private treaty sale rate is just 20 per cent. This data is consistent across residential, commercial and rural property.

Market conditions will always fluctuate but the best outcomes for our clients occur when our members are creating competition through dynamic campaigns, the classic being auctions. And that will never change.

Dan White

Managing Director, Ray White Group