Sales prior to auction rise as market bounces back in Sydney and Melbourne

The number of Melbourne vendors taking an offer on their home prior to auction has soared this year as home owners fatigued by pandemic lockdowns and a stressful year take advantage of the market bounce-back and fast-forward their property sales.

In Melbourne, one quarter of reported sales, or 25.1 per cent, were sold prior to auction last month, compared to 16.6 per cent a year ago, Domain’s auction data for November shows.

It’s a much bigger leap than in Sydney, where pre-auction sales remained at a similar level to 2019. More than one-third – or 33.8 per cent – of reported auction sales in Sydney were actually sold prior, data shows, compared to 32.8 per cent of auction sales in November 2019.

Domain senior research analyst Nicola Powell said the elevated number of properties being sold prior to auction pointed to rising markets in both capital cities.

“Sold priors are an indication of a market on the move,” Dr Powell said. “Right now it’s showing buyers really want to secure the home prior to an auction to avoid the competition.”

While snapping up a property with a pre-auction offer was the remit of buyers wanting to knock out the competition, for vendors the incentive was about getting a quicker sale so they could move on with their lives after the pandemic, rather than endure the stress of an auction after an already difficult year, she said.

“In Melbourne there has been such a long time in lockdown people just don’t want to wait any more, particularly if a buyer puts in a strong offer for the house they want,” Dr Powell said.

Barry Plant chief executive Mike McCarthy said Melbourne sellers were looking to minimise stress in every sector of the market, whether they were offloading a $600,000 property or a $6 million home.

“People have had enough stress and auctions are very stressful so there are some people who are happy to accept offers,” Mr McCarthy said. “Others would still be prepared to roll the dice at auction.”

Melbourne’s property market had come to a bottleneck in the last few months of the year, with demand for high-end homes far outweighing the supply of listings, Kay & Burton South Yarra partner Michael Armstrong said.

The competition over fewer houses for sale meant bigger offers were being made prior to auction in order to seal the deal.

Competition was so high on some properties, vendors were listing to go to auction with the intention of actually selling prior, he said.

While it was a sales tactic sellers had used in the past, it had become more common this year as fatigued Melbourne vendors prioritised wrapping up a sale at the end of a historically tumultuous year marked by the pandemic, he said.

Marshall White Stonnington director and auctioneer John Bongiorno said agents were seeing a lot more offers prior to auctions and to expression of interest sales this year, more so than any other year.

“There’s been some pretty strong results,” Mr Bongiorno said. “We have a number of properties listed for 2021 that have already sold prior to auction.”

While the number of Melbourne vendors accepting prior-to-auction offers had risen noticeably this year, in Sydney there was only a slight bump of 1 per cent on last year’s sold priors.

Pre-auction sales were at a high level in November last year when Sydney’s market was recovering from a property price downturn, the largest correction in prices since the 1980s. 

In November 2018, Sydney’s sales prior to auction accounted for just 20.5 per cent of total sales, compared with 32.8 per cent in November 2019.

Dr Powell said in a slow market, sales prior to auction could also rise, as buyer numbers dwindled and competition fell, seeing few people bidding at auctions.

But with Sydney and Melbourne’s market in lockdown this year, the sold prior numbers were indicating that people were wanting to buy and sell quickly, she said.

Ray White chief auctioneer for NSW Alex Pattaro said while buyers were making offers prior to auction, they were often expecting competition for the sale.

“Most pre-auction offers are coming in above price guides or expectations,” Mr Pattaro said. 

With vendors themselves looking to buy, some were happy to wrap up a sale quickly, prior to auction, for an acceptable price.

“They’ll wrap up a deal they’re happy with to go and make an offer at the weekend,” Mr Pattaro said. “But it doesn’t necessarily mean they’ll get the highest price.”