What makes a home more likely to sell at auction and why some cities prefer them

Property cycles and auction sales seemingly go hand-in hand. Shortly after a price upswing, the proportion of auction sales begins to rise, and when prices fall, sales by auction also take a hit. This is more so the case in Sydney and Melbourne.

In Sydney, just under one-fifth of dwellings were sold by auction throughout 2019 compared to just over one-tenth a decade ago. Auction sales peaked mid-2017 at 22 per cent of total sales, dwindling to 17.1 per cent in mid-2019, coinciding with the rise and fall of prices. As the market made a pivot mid-2019, and prices began to rise, the portion of sales by auction also took an uptick.

Melbourne takes the title of Australia’s auction capital. One-quarter of homes sold by auction over 2019, the highest of all the cities. Sales by auction peaked in early-2018 at 28.8 per cent, then dipped to about 22 per cent mid-2019, coinciding with price falls. The 2019 price rebound was echoed in auction sales, with the proportion of homes sold under the hammer rising.

Auction popularity has risen over time

Auction sales have risen over time irrespective of the underlying market conditions, and in some areas the sale method has gained greater traction than others.

Over the past decade all cities have had a proportionate rise in auction sales. Sydney, Melbourne and Canberra had the largest swing towards sales by auction. A rapid rise in auction sales commenced around 2012. This did coincide with a rise in price.

Sales by auction aren’t an intrinsic part of buying property in Brisbane, Adelaide, Hobart, Darwin and Perth but have gained traction over the past decade.

Proportionately more houses are sold by auction than units

More houses are sold by auction than units across all of our major cities, as a percentage of all sales in 2019. Melbourne continues to lead for both houses and units. Surprisingly Canberra pips Sydney, having the second highest proportion of houses sold under the hammer last year. From April 2016 to August 2019, Canberra had proportionately more houses sell by auction than any other city – a title normally held by Melbourne. A recovery concentrated in Melbourne’s upper-end is likely to have driven a rebound in houses selling by auction.

Higher priced property are also more likely to sell at auction. Median prices achieved at auction are substantially higher compared to private treaty, for houses across all capital cities. This is a similar trend for units excluding Perth, where private treaty sales were higher than that of an auction.

Properties going to auction are ‘selected’

 Sellers take their homes to auction based upon preference and expert advice. Therefore properties going under the hammer are not a random selection. The decision is based upon market dynamics and factors that will increase a properties likelihood of selling at auction. These include location, price point, property type and dwelling characteristics.

The elements that drive the highest clearance rates*

*Clearance rates based on auctions over the past 12 months to February 2020