Almost half of Melbourne auctions could fail this weekend as a series of unusual events lead to a large number of homes testing the market amid tough conditions.
Hundreds of Victorian estate agents testing the market in what is set to be the second biggest March auction week on record have been warned their sales will not go through this weekend.
With the rise in interest rates and the conflict in the flow of Iran on the effects of fuel prices and availability reducing confidence, experts have advised that almost more than half – and possibly less than 40 percent – of the property owners of 1905 who are hoping for an outcome this weekend may lock one under the hammer.
Real estate experts noted that since the majority of sellers are listing their homes before the recent interest rate hike, and before the US and Israeli attacks start a major conflict in the middle east, this weekend should be proof of why sellers should be able to change their deposit before selling.
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But the brutal news for sellers is a big win for buyers who could find themselves controlling the auction market in a way not seen since before the pandemic.
The number of planned auctions is likely to be the second highest in March since at least 2019.
The biggest March weekend on record was in 2021, when the Federal Reserve had its mortgage-backed rate at a record low of 0.1 percent.
Today the figure is 4.1 percent.
For many, holding the auction this weekend was an attempt to avoid the unusually extended market closure that will disrupt the auction market twice in April as Anzac Day falls on Saturday.
Auctions are restricted before 1pm on Anzac Day. It also joins the regular Easter market shutdown, next week.
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Melbourne’s auction market will have a big week this weekend, before taking a break for the Easter long weekend.
The last meeting happened in 2015, and not since 1998 before that. It won’t happen again until 2037.
Most of this weekend’s sellers would have listed their homes four weeks ago, before the US and Israel attacked Iran which had a major impact on consumer confidence across the economy, and before this month’s price hike.
PropTrack economist Anne Flaherty said sellers are now facing situations that were not in the cards when they committed to their sale.
The company’s data shows that in the past Melbourne approval ratings have fallen by 54-57 per cent.
“By Melbourne standards, that’s pretty weak,” Ms Flaherty said.
“I would be surprised if I see a strong approval rating (this week).
“I think consumer demand is going to have a big impact. And because of the volume of sales, they’re also going to have to look at which auction they have to go to.”
This weekend was supposed to be the last chance to clear the auction decks, but there are fears it could leave hundreds of auctioneers clutching their keys.
The economist said that although it is common for buyers to choose which auction to attend during busy weekends, the truth is that “we are in uncertain times”.
However, he said it could be a “good time to buy” for those who can afford to move.
“A lot of people have lost their confidence in what’s going on and that may be another reason why it’s a good time to buy,” Ms Flaherty added.
“Competition from other buyers may be reduced a bit.”
He added that Melbourne sellers facing a tough weekend were not alone, with PropTrack forecasts showing 1690 auctions will take place across NSW this week – against a backdrop of lettings rising from 50-53 per cent in recent weeks.
He said their approval rate may drop below 50 percent amid increased choice for home buyers.
Realestate.com.au economist Anne Flaherty does not believe this weekend’s approval rating will be strong.
The chief executive of the Real Estate Institute of Victoria, Toby Balazs, said some sellers faced a “challenging weekend with everything happening around the world and interest rates”.
“But the Victorian property market has always proved to be strong,” Mr Balazs said.
“And while not all properties will sell on the day of the auction, usually within days or weeks of posting, a deal is made. It’s not the end of the world if you don’t sell, but it will be an interesting litmus test.”
He said that while 50% approval would be a pass mark, he expected Victoria to do better than that.
He added that auctions on the outskirts of the city have increased, which may indicate that there will be more affordable houses available this weekend.
To that end, he said buyers who don’t see homes in their budget should give the market a second thought this weekend because they may find sellers more volatile than usual when meeting the market.
The difficult situation faced by the sellers could be worse if the government’s plans to force the disclosure of the prices set seven days before the auction are already in place, as many are looking at the hope that the result of their sale has changed in line with the price of fuel this week.
The CEO of REIV, Toby Balazs, said that the situation faced by sellers this weekend is further evidence that sellers need the opportunity to be flexible on the day of the auction.
“This goes to the extent that, until the day of the auction, there needs to be flexibility for the seller to meet the market and there needs to be flexibility to choose the way he wants to manage the property on the day of the auction,” said Mr Balazs.
“And, from a consumer perspective, there will obviously be more choices this weekend.”
Apollo Auctions auctioneer Greg Brydon said the proportion of homes sold under the hammer could be as low as 40 per cent, as normal clearance prices include homes sold before and after auction.
“But it’s more likely that the auction system will find your buyer,” said Mr Brydon.
“Melbourne is spiritual about auctions … but it’s the process, not the event, that brings the result.”
His advice to those with their homes not selling was to listen to all the information they received about the price during the campaign, and do their best to lock the auction on Wednesday evening – as the unconditional sale requirement that applies to auctions was still in play three days after you entered.
Greg Brydon of Apollo Auctions warned the clearance rate under the hammer could be as low as 40 per cent.
Mr Brydon added that houses priced under $1m would still do well this weekend, with rising rates squeezing buyer demand, but those above that bracket “will really start to have the brakes put on”.
Next week there are just 166 auctions scheduled for Victoria, as the market takes a breather over Easter, with 900 expected over the next seven days.
Ms Flaherty said it would be May before the auction market returns to normal.
WHAT TO DO IF YOUR AUCTION FAILS
+ Don’t panic, it’s not the end of the world – take your time and decisions in advance;
+ Be aware of what your home will sell for;
+ Ask your agent to open for inspection on Monday, Tuesday and Wednesday;
+ Consider all offers in the next three days, as they are still subject to auction rules and are considered unconditional sales;
+ Ask your agent for all price feedback throughout your campaign, and ask that potential buyers not present on the day of the auction be contacted;
+ There will be underbidders going to other nearby auctions, the more available you are to see your home the more likely they will make an offer;
+ Do not stick your head in the sand if the price response is not what you want to hear, if you buy after the sale — you may be able to recover the loss when you buy;
Source: Apollo Auctions award-winning auctioneer Greg Brydon
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