Agents who are hosting auctions this Saturday will front up to a dramatically different marketplace to the one in which they listed their properties.
Since launching their campaigns on May 10, agents have seen a likely bid to remove negative gearing and Capital Gains tax discounts repelled; APRA entertain the opportunity for buyers to borrow more; and the RBA stoking the market with its first cut to the cash rate in almost three years.
We’ve also seen property analysts suggest the downward trend of property prices has slowed. Additionally, the weekend following the Federal election produced a discernible bounce in auction clearance rates in Sydney and Melbourne
Compared to when they launched their campaigns, agents will have a spring in their step, this Saturday.
One of the reasons why auctions are so effective is that they set a deadline for buyers to produce their best offer either during the campaign, on the day or in subsequent negotiations
Over the last 12-18 months, sellers have been keen to take pre-auction offers as the credit squeeze and falling house prices – again, most notably in Sydney and Melbourne – whittled away potential bidders. Recently, I heard an instance of an auctioneer in Sydney that took taken a dozen bookings for a Saturday, only to call one on the day – all the rest sold prior. But with the market’s fundamentals changing dramatically in less than three weeks, we’ll see a big change in how auctions are managed.
We’re going to see less pre-auction offers accepted between now and the spring selling season, and more campaigns running their stated course.
Now, I’m not ruling out accepting a pre-auction offer: if a buyer wants to take the property off the market with an offer that exceeds the sellers’ hopes, the vendor should use common sense and take it. But with buyers coming back to the market – CBA reported a 10% increase in volume on its average weekly mortgage applications the week after the election – agents can have greater confidence in advising their sellers to stay the course of the campaign and benefit from on-the-day competition.
More buyers are getting their finances in order and monetary and fiscal changes – nominal tax cuts included in the Budget – will enable greater numbers to bid under auction conditions. Many agents slipped into the habit of finding one or two interested buyers during the auction campaign and soliciting an attractive pre-auction offer from them. These agents now have to change their mindset.
The onus is now on sales professionals to nurture and corral potential buyers all the way through the three or four-week campaign to auction day, where increased market competition now awaits. Agents abide by the charter to do everything in their power to secure a premium outcome for their seller. Auctions are the best environment to honour that.
Auctions are the most transparent way for bidders and sellers to determine the true worth of a property.
It also inspires emotion amongst bidders, many of whom have been sidelined from the market in recent times by the credit squeeze. Agents are normally bunkering down for the winter, content to feed off the spoils of spring and summer. But after a spring-summer selling season that produced historically low transaction volumes, their focus should be working hard to capitalise on newly presented market fundamentals.
So, for agents and sellers with properties going up for auction this weekend, good luck!
WRITTEN BY DAVID HOLMES