Home owners appear to be losing faith in the auction system as the best way to sell property, with new research showing private sale methods are closing more deals and returning higher sale prices.
The figures come as last weekend’s auction clearance rate has been revised down to 52 per cent, the worst performance posted this year and only marginally better than the sales level seen at the end of 2011.
Yesterday, the clearance rate was 60 per cent for the 328 auction results reported to the Real Estate Institute of Victoria. But with the outcome of another 38 scheduled auctions yet be reported, the sales figure is likely to be downgraded later.
The REIV also released its June quarter property price data yesterday, which suggests Melbourne’s property market has continued to underperform despite hefty cuts in the interest rate.
While the metropolitan median house price nominally rose 2.9 per cent over the three months to June, the REIV has cautioned that the movement was due to a revision in the March quarter data rather than growth. It rose 1.9 per cent for units.
”Melbourne’s median hasn’t changed in the last six months, which suggests the market has plateaued and conditions are likely to remain the same until confidence improves,” spokesman Robert Larroca said.
The figures also reveal that the sharp decline in the number of auctions being staged is partially related to a shift towards private sales in recognition that they deliver better results.
Auctions accounted for only 30 per cent of transactions in June 2012, down from 35 per cent at the same time last year.
Meanwhile, properties sold by a private sale method experienced median price growth of 2.1 per cent for houses and 2.9 per cent for units. Prices for properties sold via auction dropped 2 per cent for houses and 2.6 per cent for units.
Given that more expensive homes in the inner and middle suburbs tend to be put under the hammer, these declines also reflect the fact that properties priced above the city’s median are bearing the brunt of the downturn.
Nevertheless, it’s clear that auctions are failing to meet the expectations of many vendors who continue to hold out hope that the system is the best way to ensure a sale and maximise prices.
A home owner now stands a better than 50-50 chance of selling at auction. But nearly 30 per cent of all vendors will also end up seeing their property pass in on a vendor bid, presumably after little or no genuine action.
That’s leaving a substantial portion of vendors with no one to even begin post-auction negotiations with. Securing the right of first negotiation with the highest bid doesn’t seem to be much of an incentive, unless would-be buyers are simply being bloody-minded in the hope of picking up a deal from a spooked vendor.
All that being said, it’s clear that some properties are continuing to perform even in the current climate. (Domain’s weekly coverage of the auction market is replete with examples.)
”The really good quality stuff is still selling and still selling well. Anything with any problems attached whatsoever is not selling particularly well, and in some instances isn’t selling at all. That’s just the reality of the market place,” said John Sommers, buyer’s advocate and valuer with McRae Property.
Sourse: “The Sunday Age” – article by Chris Vedelago