The post-Covid property market surge has seen auction clearance rates soar, but what about the properties that don’t sell?
While most of the properties that pass in at auction usually get picked up soon after, there are still some that stick.
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Barfoot & Thompson auction manager Campbell Dunoon says that the non-sales are often the result of vendors testing the market.
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“They’re setting a price they’d need to be able to upgrade to their next property or just saying, ‘If we don’t get X, we’ll just stay put’,” he says.
According to figures from the Real Estate Institute of New Zealand, nearly a third of all properties sold nationwide last month were sold by auction - up from 16.4% in February 2020.
February was one of Barfoot & Thompson’s busiest months. The agency called 1015 auctions and enjoyed a clearance rate 80%.
Dunoon says: “If there’s good bidding and [the property] doesn’t sell, then the vendor has the choice to take the offer or decline, thinking they may get more. But their thinking may change 24 hours later – by which time they've had a chance to think about it, realise what the market’s told them and come back and say yes.”
Agency heads and auctioneers say most vendors have read news articles about big sales prices and properties selling for well over CV; some of them hold out for a bigger price as a result.
For these vendors, the desired sale price creeps up more and more, “especially if they know they have to buy something else in the same market”, says John Bowring, chief auctioneer for Ray White New Zealand.
“If it’s a $10,000 or $20,000 gap between vendor and bidder, you can usually close that, but when it’s $100,000 or $200,000, I say the market is saying the price. “
Martin Cooper, owner of Harcourts Cooper & Co on Auckland’s North Shore, says there have been very few instances in recent months of sellers holding out for a very high price. Last month the agency enjoyed a 94% clearance rate for the 130 auctions called.
“In one or two cases the vendors wanted moonbeams and didn’t get it. We might as well have just marketed the property with an asking price.
“Some of the vendors have read all the stories and have very high expectations, but in some stories they don't know that those places had makeovers or the CV was very low in relation to the actual value of the property. Some sellers hang their hat on their CV too much - it's for rating purposes, it’s not a valuation.”
He warns that even in the hot market vendors shouldn’t be complacent and skip essentials like good presentation or clean paperwork for things like certificates of compliance. “It still needs to look like a good property to get good money.”
Conor Patton, Bayleys national auction manager, says that a few sellers are “hearing the hype and saying, ‘if I don’t get my number then I’m not selling’.
“For some, that number is just plucked out – people have opinion on their numbers. Often we’ll be setting the reserve [before an auction] and they’ll round up $2.7 million to $3 million because it sounds like a nice number.”
He also says that sellers who have yet to buy their next property like to add “a bit of security, so they’ve got a bit of a buffer going out into the buyers’ market”.
