Success at property auctions fall to 18% at Auckland's biggest agency

Wednesday, 27 April 2022

Property investor's warning to homeowners wanting to sell.

The number of properties selling under the hammer fell to 18% during the seven days to April 22 at Auckland’s largest real estate agency, Barfoot and Thompson.

Ray White also reported a sharp decline nationally over the last seven days, with clearance rates at 37%, down 24% on the week before, a reduction the company’s lead auctioneer said was partly down to the long weekend.

Property investor Matthew Ryan, who owns roughly 100 properties, said it was time for estate agents to abandon auctions, because they reduced the amount potential buyers were willing to spend when they realised how little competition there was in the room.

Banks, like any business, want to charge as much as they can. This is what that means for your interest rates.

Ray White franchise owner Glenn Carpenter, however, said auctions are still useful, because they cut the time properties remained on the market which was important during a market downturn.

* Sight unseen, multimillion-dollar house sales on the rise

* Use of auctions for house sales hits new highs

Barfoot figures show only six of 27 central suburb properties taken to auction sold under the hammer.

Of North Shore properties, only two of 20 properties sold, and in Manukau only one of 21 properties sold.

Other areas had a stronger showing, with four of six Franklin properties selling during the week, and the only property listed in Papakura also selling.

Barfoot and Thompson has been approached for comment.

Property investor Matthew Ryan doesn’t believe landlords should be covered by incoming property management regulation.

Ray White also registered a fall in the number of registered bidders in the last seven days, with an average of 1.9 bidders per property, down 0.9 compared to the week before.

The agency also reported that over the past week a little over half (57%) of auctions received bids, down 24% on the week before.

Auction clearance rates had been falling for a while, with one investor saying in March the sales method had had its day with the market appearing to tank.

Agents ‘sending listings over the top’

Property investor Matthew Ryan said he was “astounded” real estate agents kept pushing auctions in the current market.

Barfoot and Thompson’s auction rooms have been far quieter this year compared to last.

He said auctions were excellent in a booming market because bids were pushed up by competition, but could be detrimental to prices in a falling market.

He used the example of a buyer who saw a home they loved, and might be willing to pay $2 million for.

“But Buyer B is more sceptical of the market, maybe doesn’t see the property working as well for them, and they’re only willing to go up to $1.5m.

Ray White Carpenter Realty's owner Glenn Carpenter says agents should still take properties to auction even as more properties fail to sell under the hammer.

“As soon as the auction gets to $1.5m or $1.55m then suddenly the people who would have paid $2m realise they don't have any competition because the bidding stops.

“The agents will say ‘that’s fine because we’ll just take them out the back to negotiate with the owner’.

“But anyone who has done any negotiation knows when the buyers no longer have to compete with other buyers they get very conservative about the money they will pay,” Ryan said.

Agents should be concentrating on finding the one buyer who falls in love with a house and start selling more by deadline private treaties.

“They keep sending them over the trenches, but the clearance rates are low, and instead of actually analysing, they just keep listing properties at auction.”

Auctions cut time properties on the market

Glenn Carpenter owns three Ray White franchises, operating mainly around Auckland’s North Shore.

He said auctions still had their place because they cut the time properties were on the market.

“It creates urgency among buyers, it creates structure, and puts a timeframe on it,” he said.

“You have got 30 days to get it right and get it sold. There’s always exceptions but in general if you can keep your days on the market to 30 you’re doing a good job.”

Ray White lead auctioneer Sam Steele said over the past month a property taken to auction had a median 'days on market' of 27, compared to 38 for homes marketed by private treaty, which included sales by negotiation or priced properties.

“Our current national auction clearance rate is 52% for the past 3 months, with the number of scheduled auctions in March down just 16% on the same period last year, showing confidence and an appetite to transact returning to a market that is adjusting to interest rate increases,” Steele said.

Steele said 2021 had a record number of auctions, and while the market was now returning to normality, auctions remained the preferred method of buying and selling.

“Average number of registered bidders remains steady when compared to the same period last year while properties with broad appeal are seeing reported increased active bidding,” he said.

Carpenter said during the last market slowdown in the final quarter of 2017 and first quarter of 2018, the average time a property remained on the market jumped from 23 days to 70.

Carpenter said falling auction clearance rates did have sellers asking more questions.

“A professional agent can answer those questions and give their sellers confidence to move ahead with it.

“A less professional agent will simply agree with the seller and tell them what they want to hear.”