Auction markets vary substantially across geographic regions, product types and price points.
With the recent slowdown in auction clearance rates, it’s a good time to dig a bit deeper to see which types of properties generally sell via an auction method of sale. The location of the property, the value of the property and the type of dwelling all play a role in whether a home is likely to be auctioned or not.
For starters, over the past twelve months (to the end of September this year) homes that sold at auction accounted for 19.2% of all dwelling sales; the vast majority of homes sell via private treaty rather than auction. The trend towards more auction sales has been gathering pace since mid-2012, which coincides with the commencement of the current growth phase. As market conditions heat up, more real estate agents and vendors will choose to auction a property due to the increased level of buyer competition which generally improves the chances for a home to sell at auction and obtain the highest possible price. Prior to the current growth phase, only 8.9% of dwellings were sold at auction.
Auction sales as a proportion of all dwelling sales, combined capital city regions
The type of housing also plays a role in whether agents choose to sell a dwelling at auction or not. Over the 12 month period, 20.4% of houses were sold at auction while only 16.5% of units were sold at auction. Houses are more likely to sell at auction than units.
Proportion of dwelling sales sold by auction, capitals
Looking at the price points of auction sales, it is clear that across both housing types, auction sales are typically across higher priced properties. The median price of a house sold at auction over the past 12 months was $950,000 compared with the median price of houses sold by private treaty at $530,000. 45% of houses sold by auction transacted at a price of at least $1 million while for private treaty sales the proportion was a much lower 12.5%. The median price for units sold at auction was $680,000 compared with $460,000 for units sold by private treaty.
Median sale price, houses, auctions v private treaty, combined capitals
Median sale price, units, auctions v private treaty, combined capitals
There is an auction culture geographically as well. Melbourne has historically shown the largest proportion of homes sold by auction, with Sydney and Canberra also showing a large proportion of homes that sell by auction. Over the twelve months to the end of September, 32% of Melbourne houses were sold at auction and 28% of units were sold at auction. The remaining capital cities have rarely seen auction sales comprise more than 8% of all sales.
Capital city statistics, 12 months ending September 2015
In summary, even though auction statistics are a timely and reliable indicator of housing market conditions, the results provide more insight about conditions in the two largest capital cities as well as Canberra. Moreover, auction results tend to be biased towards house sales rather than unit sales and are more often related to sales of dwellings in the more expensive price categories. As growth in the housing market slows (as we are currently seeing) we anticipate that the proportion of properties selling by auction will also slow as more vendors and agents choose to sell their properties by private treaty. Remember that buying under auction conditions are vastly different to buying by private treaty so not everyone is in a position to bid at auction. It’s important to remember these nuances of the auction market when interpreting auction results.