Close to half Melbourne’s auctions could fail this weekend as a rare series of events leads to a massive number of homes testing the market amid dire conditions.
Hundreds of Victorian home sellers testing the market in what is on track to be the second biggest March auction week on record have been warned their sale will fail this weekend.
With rising interest rates and the conflict in Iran’s flow on effects to fuel prices and availability smashing confidence, experts have advised barely more than half — and potentially as little as 40 per cent — of the 1905 property owners hoping for a result this weekend are likely to lock one in under the hammer.
Real estate experts have noted that with the vast majority of the sellers listing their home before the latest interest rate hike, and before US and Israel attacks set a major conflict in motion in the middle east, this weekend should serve as proof why vendors should be able to change their reserve in the lead up to auction.
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But the brutal news for sellers is a major win for homebuyers who could find themselves in control of the auction market in a way not seen since before the pandemic.
The huge number of planned auctions is likely to be the second highest tally for March since at least 2019.
The biggest March weekend on record was in 2021, when the Reserve Bank had the cash rate that underpins home loans at a historic low of just 0.1 per cent.
Today the figure is 4.1 per cent.
For many, planning an auction this weekend was a bid to beat a rare extended market shutdown that will effectively derail the auction market twice in April as Anzac Day falls on a Saturday.
Auctions are banned before 1pm on Anzac Day. It also joins the normal market hiatus for Easter, next week.
Melbourne’s auction market will have a monster week this weekend, before going into a hiatus for the Easter long weekend.
It’s a confluence that last occurred in 2015, and not since 1998 prior to that. It won’t happen again until 2037.
Most of the sellers for this weekend would have listed their home about four weeks ago, before the US and Israel attacked Iran which has sparked significant impacts on consumer confidence across the economy, and before this month’s rate hike.
PropTrack economist Anne Flaherty said vendors now faced conditions that were not on the cards when they committed to their sale.
The firm’s data shows that in the past fortnight’s clearance rates for Melbourne have hovered at 54-57 per cent.
“By Melbourne standards, that’s quite weak,” Ms Flaherty said.
“I would be very surprised to see a strong clearance rate (this week).
“I think that buyer demand is absolutely going to have taken a hit. And with the volume of sales, they will also be facing the consideration that they will have to choose the auction they will have to go to.”
This weekend was supposed to be a last chance to clear the auction decks, but there are fears it could leave hundreds of sellers still holding their keys.
The economist said while it was common enough for buyers to have to choose which auction to attend in busy weekends, the reality was “we are in a very uncertain period”.
However, she said it could be a “great time to buy” for those who had the wherewithal to make a move.
“A lot of people have had their confidence rattled by what is going on and that’s potentially yet another reason why it’s a good time to buy,” Ms Flaherty added.
“The competition from other buyers might be slightly subdued.”
She added that Melbourne sellers facing a tough weekend were not alone, with PropTrack forecasts indicating 1690 auctions will take place across NSW this week — against a backdrop of a clearance rate that has hovered from 50-53 per cent in recent weeks.
She said it was possible their clearance rate could even dip below 50 per cent amid the surge in choice for homebuyers.
Realestate.com.au economist Anne Flaherty does not believe this weekend’s clearance rate will be a strong one.
Real Estate Institute of Victoria chief executive Toby Balazs said some sellers faced a “challenging weekend with everything going on in the global context and interest rates”.
“But the Victorian property market has always shown itself to be pretty resilient,” Mr Balazs said.
“And while not all properties will sell on auction day, most often in the days or weeks post, a deal gets done. It’s not the end of the world not to sell, but it will be an interesting litmus test.”
He said while a 50 per cent clearance rate would be a “pass mark”, he was expecting Victoria would do better than that.
He added that there had been an increase in auctions in outer suburban areas, which could indicate there would be affordable home options available this weekend.
To that end, he said buyers who were seeing homes listed within their budget should absolutely give the market a crack this weekend as they might find vendors more flexible than normal in meeting the market.
The difficult scenario faced by vendors could be worse had government plans to force the disclosure of reserve prices seven days ahead of auction already been in place, with many facing the prospect their likely sales result had shifted alongside fuel prices this week.
REIV chief executive Toby Balazs said the scenario facing sellers this weekend was further proof vendors needed scope for flexibility on auction day.
“This goes to the point that, right up until auction day, there needs to be flexibility for the vendor to meet the market and there needs to be flexibility for them to chose how they want to manage the property on auction day,” Mr Balazs said.
“And, from the buyer perspective, there will obviously be a lot of choice this weekend.”
Apollo Auctions professional auctioneer Greg Brydon said the share of homes sold under the hammer would likely be as low as 40 per cent, as typical clearance rates also included homes sold before and after auction.
“But it’s very, very likely the auction process has found your buyer,” Mr Brydon said.
“Melbourne is spiritual about auctions … but it’s the process, not the event, that delivers the result.”
His advice to those whose home did not sell was to listen to all the information they had received about price during the campaign, and to do what they could to lock in a sale by Wednesday evening — as the unconditional sale requirement that applies to auctions was still in play for three days after you passed in.
Apollo Auctions’ Greg Brydon has warned the clearance rate under the hammer could be as low as 40 per cent.
Mr Brydon added that homes priced below $1m might still do well this weekend, due to rate hikes compressing buyer demand, but those above that bracket would “really start to have the brakes put on”.
Next week there are just 166 auctions scheduled for Victoria, as the market takes a breather for Easter, with about 900 anticipated in the following seven days.
Ms Flaherty said it would be May before the auction market got back to more normal rhythms.
WHAT TO DO IF YOUR AUCTION FAILS
+ Don’t panic, it’s not the end of the world – take your time with decisions ahead;
+ Be conservative about what your home will sell for;
+ Ask your agent to run open for inspections on Monday, Tuesday and Wednesday;
+ Consider all offers in the next three days, as they are still subject to auction rules and considered an unconditional sale;
+ Ask your agent for all price feedback across your campaign, and ask to have potential buyers not present on auction day contacted;
+ There will be underbidders who went to other auctions nearby, the more available you are for them to see your home the better the chances they will make an offer;
+ Don’t put your head in the sand if the price feedback is not what you want to hear, if you are buying after you sell — you might well be able to make up a loss when you purchase;
Source: Apollo Auctions award-winning auctioneer Greg Brydon
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