Seller success: Which properties win at auction

The auction method has soared in popularity over the past five years in response to frothy market conditions and a growing desire for a quick sale. However, not all homes are equal under the hammer. 

A data crunch by Domain Research House has answered the where, when and what of achieving success at auction, proving that each capital city market has its own recipe for success.

The auction recipe for success

Sydney

Bucking trends in the other capital city markets – Sydneysiders are more likely to purchase a unit under the hammer than a house. And despite the long-standing popularity of Saturday auctions, vendors who sell on Thursdays have enjoyed a higher clearance rate over the past 12 months. The lower north shore has the highest success rate at auction and three-bedroom units with one bathroom have proved the most popular mix with buyers.

Melbourne

Despite Saturday being the most popular day for auctions, over the past 12 months vendors who have gone to auction on a Sunday have had better success under the hammer. Across the city units have outperformed houses at auction with the winning combination two bedrooms, one bathroom and two car spots. In terms of neighbourhoods the auction method has proved most successful in Melbourne’s inner-south.

Brisbane

Over the past 12 months clearance rates on Saturdays have pipped all other days of the week. Not surprisingly the inner-city has the highest success rate at auction, with buyers most keen on houses with three bedrooms, one bathroom and a spot for the car.

Adelaide

Smaller houses are more likely to drive an auction purchase in Adelaide, with the metro-west achieving the highest clearance rate over the past 12 months.  The winning combination this year has been properties with two bedrooms, one bathroom and two car spots.

Perth

Houses located in inner-Perth have been hugely popular over the past 12 months, particularly if they have three-bedrooms, one-bathroom and two car spaces. Like Brisbane, the best bet for Perth vendors is to go to auction on a Saturday.

Canberra

The affordable heartland of Belconnen is home to the highest auction success. With buyers seeking a house (three-bedroomss, one-bathroom and two car spots). Vendors might consider auctioning mid-week considering Wednesday has had the highest clearance rate over the past 12 months.

Darwin

Vendors in Darwin city are most likely to find the hammer fall on a Saturday, with houses featuring three-bedrooms and one-bathroom the most popular. The city’s north is where vendors enjoy the highest clearance rate at auction.

Hobart

A higher clearance rate is achieved on a Saturday, particularly if the home is located in inner-Hobart. Houses with three-bedrooms, one-bathroom and a single car space have the highest chance of success on the day.

The surging popularity of the auction method

It is no coincidence that the sway toward auctions began to gather pace in mid-2012, a time when many major capital city markets moved into upswing.

A decade ago, Australia’s combined capital cities had only 13.2 per cent of dwellings sold by auction, rising to 21.5 per cent in 2018.

There is a positive relationship between price appreciation and the proportion of homes that sell by auction. Over the past 15 years during strong periods of price growth, a higher percentage of homes sell at auction, and the opposite during slower periods. The association is most evident for homes in Sydney, Melbourne and Adelaide.

It is logical – when market demand is rising, buyers will bid more competitively and greater numbers of vendors are likely to take advantage of the rising market conditions.

The cities waving the auction flag

Historically auction culture has been determined by geographic location. Melbourne is the most auction centric capital city market in Australia – over the past year almost a third of transactions in Melbourne occurred via an auction campaign.

However, as market dynamics change so too does the prevalence of the auction method.

This year Canberra has pipped Sydney to become the city with the second-highest proportion of sales by auction. Currently 22 per cent of sales in our nation’s capital are via auction compared with Sydney, which is sitting at 21.6 per cent.

For Canberra, there is little association between price growth and the proportion of homes sold by auction, indicating the rising popularity as a method of sale.

Given the association between price growth and auction success in Sydney and Melbourne, it is likely that proportionately fewer homes will be sold by auction in the coming months. This scenario is already impacting Sydney and signs are also starting to materialise in Melbourne.

That said, there has been an underlying increase in auction popularity over the past decade. A pull-back in the proportion of sales by auction is anticipated, but it is unlikely to drop down to the levels experienced before the price upswing.

As well as location, there are a number of factors that heightened the chance of a sale by auction. Houses are more likely to sell by auction than units across each capital city market. Melbourne and Canberra have set the benchmark with 32.4 per cent of houses sold by auction in the 12 months to the end of June, followed by Sydney at 23.5 per cent.

Melbourne and Sydney had a significantly higher proportion of unit sales by auction compared with other capital cities, at 25.1 per cent and 18.4 per cent respectively. With all other markets struggling to achieve above 3 per cent, excluding Canberra at 6.4 per cent. The increased popularity of units in Sydney and Melbourne reflects affordability constraints, infrastructure woes and an activation of first-home buyers.

Higher prices achieved at auction

Auctions tend to achieve a higher median price relative to private treaty – a trend unanimous across the capital cities (excluding units in Hobart and Darwin). Across both dwelling types auctions tend to skew towards a higher price point, which largely reflects the calibre of homes sold at auction. In Sydney 78.8 per cent of houses above $1 million sold at auction.

Dr Nicola Powell is a senior research analyst at Domain Group.