A fear of missing out has been replaced by a fear of overpaying in Auckland’s auction rooms. Photo / 123rf
Auckland’s market downturn is leading to quiet auction rooms and one real estate agency recently cancelled five auctions the day before they were due to take place because no one had registered to bid on the homes.
The drop in auction sales is being attributed to Auckland’s slowing housing market and some real estate agencies are looking to avoid wasting their sellers’ time by cancelling auctions if bidders aren’t registered early enough.
Property website OneRoof reports just 23.4 per cent of Kiwi homes going under the hammer last month sold during their auctions.
In the past week, Auckland real estate agency Barfoot & Thompson had even fewer homes sell: 25 out of 131 homes sold under the hammer – a 19 per cent clearance rate, according to media outlet Interest.co.nz.
Auckland’s average house property value has now fallen 2.2 per cent or $34,000 over the past three months, according to new data by OneRoof and analysts Valocity.
It’s the city’s third consecutive quarter-on-quarter decline.
OneRoof editor Owen Vaughan said the new data pointed to further price drops in the future.
“The biggest concern for those who bought at market peak is whether or not their property is worth less than what they paid for it,” he said.
“For those who plan to be in their home for a long period and can repay their mortgage, negative equity won’t be a pressing issue.”
“But rising interest rates and cost of living pressures will put the squeeze on homeowners and the safety valve of being able to sell in a rising market is no longer there.”
It comes as prices began to be squeezed last year when tighter lending rules made it harder for home buyers to gain approval for mortgages from banks.
Now rising interest rates and cost of living pressures are further dampening house price growth.
Economist Tony Alexander said in February fierce competition to buy among home buyers, colloquially known as FOMO or fear of missing out, had collapsed and been replaced by FOOP, a fear of over-paying.
That’s leading to more negotiations between sellers and buyers about sale prices, he said.
Harcourts agent Diego Traglia, who last year listed 200 properties for sale by way of auction, told OneRoof he still recommends using auctions, despite the drop-off.
“Last year 80 per cent sold under the hammer, this year it’s more like 25 per cent. But then another half will sell within 48 hours,” he said.
“Now we’ll go with just a two-week campaign to see if there is cash out there. Cash is king, then we’ll move to a conditional sale.”
Added to the drop-off in demand is reportedly a greater push by agents to ensure bidders are registered the day before auctions take place.
The auctions of five homes were recently cancelled by one agency the night before they were due to go under the hammer because no-one pre-registered.
Belinda Moffat, chief executive of industry regulator the Real Estate Authority, said there had not been a law change regarding pre-registering for bidding.
“Pre-registration of bidders before a property auction is not a specific requirement of the Code of Conduct or the Real Estate Agents Act, though it is standard agency practice,” she said.
“Accordingly, REA does not regulate how or when pre-registration occurs; however, as part of our guidance to the sector in 2021 around operating in a Covid environment, we did suggest agencies consider earlier pre-registration, to help manage numbers, distancing and contact tracing.”
Ray White Manukau owner Tom Rawson said his agency had been seeking to pre-register bidders as early as possible before auctions since the middle of last year.
It was partly a response to the then heated market and Covid lockdowns in which many people unknown to the selling agents showed up to bid at auctions, despite having never set foot in the house they were bidding on, he said.
Pre-registering allowed Rawson team to ensure all the auction paperwork is done on time, including details of proof of ID, a home loan pre-approval letter, anti-money laundering data and details of the buyer’s lawyer in case they “fall off the face of the earth” after bidding.
Most of the industry had now followed in their footsteps and implementing the same processes, Rawson said.
However, if a late bidder did arrive at an auction, they still could potentially bid.
Rawson said his team would let the person selling the home decide whether they wanted the bidder to participate or not.
It was about smoothing the auction process out and making sure nothing went wrong, he said.
A 74-year-old staff member at his office remembered once having to chase a person up Queen St in years gone by after the person won an auction but then did a runner, Rawson said.