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The Grim Auction Clearance Rates

13 June 2018

When it comes to the Auckland residential real estate market, it seems that very few people are talking openly about the elephant in the room, actually the elephant in the auction room! For quite some time now the auction clearance rates for residential property in Auckland have been pretty awful, sitting well below 30%. Last week’s mid-week auctions results from a large Auckland Real Estate Agency were particularly poor, achieving 17%, with six sales out of 35 properties auctioned!

Across the Tasman, the Sydney auction clearance rates are published in the media every week. If these fell below 50%, let alone below 30% like Auckland’s are achieving (or not achieving), the panic bells would be ringing loudly. The Sydney clearance rates last week were 55%.

There are questions that need to be asked in relation to these low clearance rates. Firstly, are property owners advised what the auction clearance rates are when they sign up for an auction? An honest and transparent process should ensure that a property owner, who is selling their most valuable asset as well as likely spending a substantial amount on advertising, needs be aware of their chances of success, allowing them to make an informed decision.

Secondly, why are the auction clearance rates so low in Auckland? We all know the market has slowed, but a likely reason is that the buying public has auction fatigue and simply have had enough of so many properties been sold by auction, particularly in a quiet market. Many buyers are aware that auction clearance rates are low, so are prepared to sit and wait until after the auction to see what happens from there. Another issue is that many buyers are dependent on getting their banks approval before going unconditional on their property purchase. This is not possible with an auction purchase as these are an unconditional purchase. Therefore many buyers simply cannot participate in the auction process.

And question three is of the small percentage of auctions that are selling, what proportion of these have only one strong bidder. Also how many sales are negotiated after the auction ends and should these figures be included in the auction clearance rates.

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