It’s no secret that auction activity around Auckland has heated up in the past three months — far more than the usual spring market up-tick.
Campbell Dunoon, Barfoot and Thompson’s Auction Manager, says would-be bidders need to move fast but accepts that prices under the hammer may move out of reach.
“You have to be prepared to go to an auction and walk away not owning — this time. It’s a matter of time and persistence,” he says.
“When I was buying my own house, it took me three attempts to get the property I wanted.”
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On the upside, Dunoon points out that if there are lots of other people fighting it out for the same property, that’s a good sign for its future worth.
“If it’s that sought-after, it’s going to hold its value and there should be a similar amount of competition when you come to sell.”
He acknowledges that fast-paced auctions can be daunting to buyers but says the number of listings being sold by auction is on the rise. This month alone the company has so far auctioned 584 properties, of which 60 per cent sold under the hammer.
“There’s a lot of activity in the market, so people need to get ready for an auction,” he says.
“You have to have finance approved prior to the auction. I don’t ask people to skip their due diligence, but in the current climate you need to be prepared early, as vendors are entertaining early offers and bringing auctions forward.”
Dunoon advises buyers not to make the first auction they go to the one that really matters for the house of their dreams. Instead, spend a few hours to get a feel for the tempo of an auction and how an auctioneer works — it’s easy to follow online at barfoot.co.nz/auctions-live in real time or later at home.
The beauty of auctions, both Dunoon and long-time Barfoot and Thompson North Shore auctioneer Tony Loughran say, is that the auction price is the best, most transparent measure of the market value at that time.
“The auction market keeps up with the property market,” says Loughran.
“I don’t know how many of these cycles I’ve been through but in a falling market no or low bids show the vendors the money is not there. In this market, it tells the vendor what their house is worth.”
Loughran says that in the rapidly rising cycle we’re in at the moment, agents are only guessing at values on a house.
“We had one recently for a development site. The reserve was $1.25 million. There were 100 at the auction and the bids went whizzing up to $1.615 million. It’s been happening a lot, I’d be way too scared to estimate a price just now.”
Loughran says buyers, particularly first home buyers, need to be realistic about their expectations in this market that they may not get their dream home this time around but they’ll get their foot on the property ladder, pay down the mortgage and then have more leverage to get into their next home.
Dunoon attributes the buoyant market as a result of not just the usual Kiwi passion for property but also the general sense of confidence in the country as a whole.
“Where else are you going to put your money? New Zealand is the best place to be at the moment in contrast to the rest of the world.”
Below, Dunoon gives six good reasons why people should consider auctions for their sales campaign:
1. Demonstrates vendors are serious
“There is a strong argument to say that auctions show a willingness by the owner to sell,” says Dunoon, adding that an auction puts vendors in control. “They set the reserve and possession date that suit their needs.”
2. Has a fast turn-around
With auctions there is a finite selling period and the marketing campaign is concentrated, whereas negotiation is open-ended and could take weeks or months longer.
3. Gives a better sense of market price
Auctions are an immediate show of market forces; the price buyers are willing to pay on the day.
“You set a reserve and the price the property reaches on the day or in subsequent negotiations gauges what the market is actually willing to pay.”
4. Flushes out cash buyers
Cash is king in real estate. With an auction buyers are cash unconditional and once the deal is done they can’t back out: the house is sold when the hammer falls. It’s no wonder vendors love cash buyers. With negotiation there can be complicated conditions attached to a sale. “Conditions create risk for the vendor,” says Dunoon. “If auctions don’t lead to sales, they will have at the very least flushed out the conditional buyers who can then be negotiated with.”
5. Creates a sense of urgency
“With an auction there is a sense of urgency, which makes buyers show their hand. Buyers have to get themselves ready and they can’t afford to sit back. Auction day really does get the procrastinators to take action.”
6. Buyers may pay more
Where auctions attract multiple bidders they create the conditions for customer competition. That in turn can lead to a premium price and sometimes vendors are pleasantly surprised with the outcome. Dunoon says that, mentally, buyers have bought the house before they walk through the auction room doors and will stretch further financially than they anticipated.
