Prestige sellers abandon auctions as clearance rates remain weak

Sellers in prestige markets are beginning to look at alternative methods of selling as auctions are failing to deliver attractive prices, according to property experts, with Melbourne vendors attempting to hold on to substantial price gains.

The comments come as auction clearance rates across the major capital cities remained just below 60%, despite a substantial increase in the number of properties put to market.

Kay & Burton managing director Michael Gibson said in the Australian Financial Review this morning that sellers in the multi-million dollar range are now abandoning auctions and seeking alternative forms of selling.

“There is absolutely no doubt we are having to work a lot harder and be a lot more innovative with the way we are marketing our homes at the moment,” Gibson said.

“Auctions are no longer the automatic choice, as buyers in this market are not driven enough to bid at auction.”

Gibson also commented the firm is now spending a lot more time in face-to-face discussions with clients, and that many sellers have to readjust the price for which they think their property will sell. Many are opting for a higher price, but higher stock levels and a shortage of buyers means many have to think again.

Australian Property Monitors chief economist Andrew Wilson says this is no surprise, as vendors find they are unable to get the best price through traditional auction channels.

“Prestige markets have held up well in Sydney and Melbourne. Of course, prestige markets were originally the main target for auctions, but now they’re modelled to be a property selling method for most areas.”

“Now, given that market clearance rates have quieted down and it’s a subdued market, I suppose it’s sort of a wait-and-see game at the moment. It’s not surprising that the top end of the market is looking for alternatives.”

The market for properties priced over $1 million has remained fairly steady, Wilson says, with prices holding up fairly well over the past two years. But he warns, “we’ve got a general softening coming and that’s really because there are no sales.”

“I think generally there is a disconnect between sellers and buyers at the moment,” he says, warning any improvement in sales may not be seen until September or October.

“What I think we’ll see over the next month or so is a recalculation on the part of vendors and they will start waiting until Spring.”

By then, the market may have stabilised and sellers will be able to claim higher prices. But he also admits this has a lot to do with the Reserve Bank’s decisions on interest rates.

“I think we’ll be on hold for a couple of months with regard to interest rates, and that will generate some confidence. But we’ll have to wait and see.”

According to the Real Estate Institute of Victoria, demand remained subdued “for the fifth weekend in a row”.

This week, although 829 auctions were reported, the city recorded a clearance rate of just 59%. Next week a total of 785 auctions are expected.

In Sydney, the city recorded a 58.7% clearance rate from 401 reported auctions, while Brisbane and Adelaide recorded rates of 36.7% and 42.3% respectively.