28/05/2020
Auctions give bidders front row seats to home values
As auctions return to clearance rates (the proportion of properties selling under the hammer at auction) similar to those pre-lockdown, bidders and vendors in the country’s auction rooms are getting the most accurate view of property values in the current market.
John Bowring, chief auctioneer at Ray White, says the results he’s seeing are very strong.
On price, he says he hasn’t found any data that showed that prices were falling back by anything significant like the 15-20% mooted in the media. However, the seasoned auctioneer says the volumes still have a way to go – he has seen them drop by 20%, and has around 70 auctions booked for the next month compared to the normal 100 plus.
Clearance rates, meanwhile for Mr Bowring were just as good as they were pre-lockdown. His clearance rates are 65-70%, and as they start to get more on, these will be more like 80-85%, he says.
He has been pleased to see the good properties that have come fresh to the market post-lockdown are flying, he says. “Everyone has come back very motivated after six weeks’ off”.
Interest is particularly strong for family homes in the $1 million to $2 million price range, also the $2 million to $3 million is still very good, he says.
Ray White Carpenter Group on the North Shore is also reporting that with LVR restrictions lifted and interest rates at an historical low, its agents are seeing more first home buyers coming to the market. They’re filling the places of those who have had to call off their search due to job losses or taking pay cuts.
The group’s Loan Market broker estimates that if you’re a renter paying $763 a week, with a 10% deposit, you can afford an $800,000 home financed by a 30 year term loan at 3.69%.
So why should potential sellers auction now in this market? With an election in September which could cool the market, as they often do, Mr Bowring says he’s telling vendors he’s speaking to, whether going through Ray White or not, to go now.
While there is a lack of stock, it makes sense for vendors to make the most of the seller’s market, he says.
And for buyers, if you’re fearful of the twists and turns the property market is making, and need social proof from others, seeing the competition and the transparency of an auction is attractive.
As Bayleys’ national auctioneer, George Yeoman says, auctions are bringing two key things to buyers and sellers at the moment which are particularly relevant for the times.
“The buyer is seeing transparent value being derived and they’re confident that they’re not overpaying. When paying by tender, you’re blindfolded and don’t have the market guiding you. At the same time auction is providing confidence to the vendor, giving them timeliness and certainty. And people need certainty right now,” he says.
Being there while the markets are coming alive
The markets are waking up, says Harcourts national auctioneer, Aaron Davis, who’s seeing listings volume coming back with genuine vendors.
The auctioneer is also encouraged by the numbers going through open homes – he has heard of groups of 30 and 40 going through homes last weekend.
“If anything, you’re not getting the nosy neighbours turning up to open homes, you know people inquiring are genuine,” he says.
The change in the market he’s seeing is cash is the only currency, says the auctioneer.
Property as an asset holding up well
Barfoot’s is seeing a flight to residential property as an asset, property holding value well in comparison with other investment assets such as stocks and shares, according to Barfoot & Thompson’s auctions manager, Campbell Dunoon.
“There’s an acceptance by the Auckland population that whatever happens, real estate will continue,” he says.
Barfoot’s is also seeing strong expat interest and inquiries from overseas buyers who are able to attend auctions digitally.
“New Zealand is the poster child of success with this thing. There is a lot of interest from people overseas, expat families wanting to come home,” says Mr Dunoon.
The auctioneer says he’s seeing a mix of bidding from people at the auction rooms, those bidding on auctions in person, those using live-streamed platforms and then, telephone bidding.
Setting the reserve price taking more work in this market
Ray White’s John Bowring says that in order to help vendors set a reserve price for their homes at auction, agents will have to go the extra mile to get buyer feedback.
The agent and the vendor usually discuss a reserve price after open home and viewing feedback, but this has been less comprehensive under Alert Level 3 and Level 2.
“Agents will have to stay extraordinarily close to buyers and ask the right questions,” says the Ray White auctioneer.
Lauren Davies, general manager of the Ray White Carpenter Group, which trialled remote online auctions successfully during Level 4 lockdown, was wowed by the attendance of the group’s auctions last week. She saw seven out of nine homes go under the hammer, a number of them properties in the $1 million plus price range.
“Everything we auctioned sold at, or above, expectation. None of the vendors had to take a hit, values are holding,” she says. “There was energy in the room, money is cheap and stock is low.”
One property her office auctioned last week, an estate sale, had 18 registered bidders which she said was phenomenal in any market.
“It was unbelievable, a lot higher than usual. We’ve always had registered bidders but not numbers like that,” she says.
The Ray White Carpenter group, as with most of the real estate firms who do auctions, will be offering a hybrid way of attending and bidding at auctions, digitally, in person or by phone.
While last Tuesday saw a number of people bidding remotely on auctions, by Thursday all the bidders were in the room and they were very active, she says.
People like to turn up in person to “eyeball the competition,” she adds.
The Ray White general manager is feeling bullish about the coming weeks. She has signed up a number of new listings in the last few days which will come to auction. The team can genuinely tell vendors now is a good time to sell, she adds.
Stock levels will rise as people see the success of the results and the confidence is there, she says.
