Going, going ... where have all the bidders gone?
Fewer properties are selling under the hammer as the property market cools, prompting a warning to vendors to take care in how they choose to sell their properties.
Real Estate Institute statistics show just 956 properties sold by auction in May, down from 1982 in May 2016, a drop of more than half.
Auctions made up 13 per cent of total property sales, from 22 per cent in the same time last year. Auckland had 536 of those auctions, or 24 per cent of all sales, compared to 42 per cent in May 2016. Waikato had 10 per cent sold under auction, Wellington 6 per cent and Canterbury 12 per cent.
Gareth Kiernan, chief forecaster at Infometrics, said the trend was likely to continue because of the drop in buyer numbers in the market.
Turnover is down significantly in most areas of the country, and by 30 per cent in Auckland. He said there had been a bigger than expected impact on buyers from the latest round of loan-to-value restrictions, which limit lending to investors. Banks are also tightening their lending criteria.
Auckland had been disproportionately affected by that reduction in sales, he said, and auctions had been a favoured sale method there.
Real Estate Institute chief executive Bindi Norwell said that even in a slower market it could be a way to get the highest possible price.
‘‘The minute you set a price on your property, no one will pay more than the price you’ve set,’’ she said.
‘‘It still allows you three opportunities to sell – prior to auction, at the auction itself or by negotiation if the property is passed in. It creates a sense of urgency and can shortens up the length of time your property is ‘on the market’, and a skilled auctioneer can still help negotiate a strong sale price – even if there is only one interested buyer.’’
But the tactic can backfire if there are not enough bidders because each party can see what others are willing to pay. That can limit the extent to which they are willing to increase their bids.
It was difficult to see a recovery in the number of house sales or buyers to the level recorded previously, Kiernan said. ‘‘The market is nowhere near as much of a seller’s market as it was previously. That influences what people think about in terms of the ways to sell.’’
Kiernan said some vendors would probably need to think about different ways of marketing their properties that would make it
easier for buyers – ‘‘rather than a scary auction scenario where they have to front up and cover the cost beforehand of building checks and valuations, not knowing whether they will get the property.’’
Property commentator Andrew Duncan said auction clearance rates were returning to a rate that
had previously been normal.
His experience with an Auckland agency had revealed a clearance rate of 50 per cent under the hammer and 70 per cent in the six to eight weeks afterwards.
‘‘A 50 per cent chance of selling within four weeks is not too bad,’’ he said.
‘‘Auckland has been a bit spoilt of late.’’
A slowdown in the market made it easier for people to move, he said.
‘‘If you’re a seller, previously you had to sell to be an unconditional buyer going forward.
‘‘But if you sold and you couldn’t find a house within a month or two suddenly you were $50,000 behind because you’d been priced out. Now people know the market is not going crazy, you can take your time about buying and make offers subject to selling your own home.’’
Duncan said some properties would still do well at auction. Agents confident that a house would attract at least three to five unconditional bids could still try to sell it under the hammer.
But anything that did not have such broad appeal should be sold with a different strategy.
A spokeswoman for Realestate.co.nz said there had not been a change in the proportion of houses listed as for sale by auction.