Across New Zealand, auction clearance rates have taken a bit of a plunge recently. But while auctions aren’t the selling frenzy they once were, they’re not the only way to sell a property.The downturn is part of the transition from a seller’s to buyer’s market, in large due to the 2016 loan-to-value restrictions, tighter bank lending and rising interest rates.
Towards the end of 2015, near the peak of the property boom, auction clearance rates in the Hamilton property market were around 65 to 75 per cent. Last year saw a turn with the rate dropping to 46 per cent, and this year it looks set to continue the downward trend. Of the 32 homes reported for auction on Interest.co.nz in March, the best sales month for 2017 so far, only five properties sold—a clearance rate of 15 per cent. In April, it was only five per cent.
Despite the evidence that auctions are on the out, Lodge Real Estate still managed a 42 per cent clearance rate in April. It proves, once again, that they are one of Hamilton’s leading real estate agencies for a reason
“While that figure is down from mid-2016 figures, there is still plenty of property selling in competition and the results are, surprisingly, on the upside,” says Lodge Real Estate Managing Director, Jeremy O’Rourke.
More and more properties are going up for auction and being passed-in without any bids. While it might seem like putting a property up for auction is wasting a lot of time, effort and money, don’t discredit it completely.
“We’ve shifted into a buyer’s market and we’re now seeing more buyers taking a cautious approach,” Jeremy says. With frenzied property purchasing in the past, buyers can now afford to take their time when choosing and assessing a property.
As a result, more homes are being listed at fixed price, by negotiation and, occasionally, as an expression of interest rather than as an auction. However, it’s also becoming increasingly common to get multi-offers on properties straight after an unsuccessful auction. This again highlights the shift towards a buyer’s market, where buyers are less inclined to put an unconditional offer in under the hammer.
“Some of the benefits of the auction process are often missed if we focus too much on the outcome of the auction itself,” says Jeremy. “Although a property might not sell under the hammer, the auction process is still finding multiple interested parties, producing buyer competition and, ultimately, a result for the vendor.”
While auctions are becoming less attractive, they are still a good selling strategy under the right conditions.
“There’s strong competition for modern and renovated homes in many established and sought-after suburbs,” says Jeremy. “Auctions of properties and development projects in these areas are still very successful.”
“Because auctions continue to generate interest and competition among buyers, taking your property to auction still provides a real opportunity to secure a premium price for it, either under the hammer or post-auction.”
As in any buyer’s market, sellers do need to temper their expectations. The bidding wars are over. However, there are still good gains to be made—it’s just a matter finding a selling approach suited to your home. And the best way to do that is to enlist the help of a local agent who knows the market inside-out.