Which method is best? Comparing the success of online vs on-site auctions in Canberra

There are both online and on-site auctions taking place in the current market. If I’m selling a home, what option is better?

In recent months buyers and sellers have been gripped by uncertainty as social distancing rules escalated and an economic shutdown became a reality, which directly impacted on many property decisions. 

The effect of coronavirus restrictions was immediate on the local auction market with vendors having to adjust to the new selling environment, while the industry became agile to adapt to the rapidly changing conditions.

During this time, an extraordinary amount of innovation emerged from the real estate sector, including shifting transactions to a virtual environment in just a matter of days, which under normal circumstances would have taken much longer to implement.

Prior to the coronavirus pandemic, Canberra clearance rates had gathered momentum mid-2019 and early into 2020, reaching a 13-year high in February of 78 per cent, the third-highest monthly output since auction collections commenced. The subsequent two months produced a weaker performance that bucked the previous positive trend.

From March 25, the federal government placed a ban on public real estate auctions as part of social distancing measures to slow the spread of COVID-19.

The temporary ban on holding on-site auction gatherings changed the way property was transacted overnight. Many of the homes scheduled to go under the hammer in April would have been listed prior to this announcement and vendors had the choice of selling by private treaty, expressions of interest or hold the auction online.

The number of auctions withdrawn bounced to record highs in the immediate weeks following the ban. In April one-third of the scheduled auctions were withdrawn, which has weighed down the clearance rate to a 12-month low.

The proportion of auctions withdrawn tends to decline in a strengthening market, and the opposite during periods of softening. It is an early sign of market weakness, although it may not mean significant price falls will ensue given the significant withdrawn lift was a direct response to a government policy change.

Many withdrawn auctions remained “for sale”, having been shifted to other sale methods such as private treaty or expressions of interest. Others embraced the virtual auction world with success. 

Canberra’s auction market was resilient compared to Sydney and Melbourne. In April, Sydney clearance rates plummeted to a 15-year low while Melbourne reached the lowest point on record. In comparison, while Canberra dipped to 45 per cent in April, it was the lowest in just 12 months. In May, clearance rates bounced to 66 per cent, the highest since the February peak pre-COVID-19 crisis.

A detailed dive into Saturday auction results clearly highlights the impact of the on-site auction ban. While the first two Saturdays of virtual auctions provided weak results, by the end of April and first weekend in May, online success rates rose.

Online success is the percentage of properties successfully sold at auction on the given auction day. This only includes the auctions that occurred on the given date and does not include postponed or withdrawn auctions – unlike the onsite auction clearance rate, which includes homes sold prior to auction, withdrawn and postponed.

Online auction success rose as the weekends ticked on. By April 18 and May 2, virtual success rose to 67 per cent and 60 per cent respectively. While the number of homes auctioned virtually was low, it is clear that homes with robust buyer interest sold online.