Dramatic declines in auction clearance rates are prompting a shift in sales strategies within Australia’s largest auction hubs, with some real estate agents setting auction dates they hope sellers will ultimately bypass.
The drop in auction clearance rates comes in the wake of increased interest rates. Additionally, some experts suggest that proposed federal changes to capital gains tax and negative gearing might also be influencing the market.
This past week, property research company Cotality reported that of the 1,900 homes that went to auction across the nation, only 47.4 percent were sold. This marks the lowest clearance rate since April 2020, as the COVID-19 pandemic began affecting Australia.
In the auction-heavy cities of Melbourne and Sydney, clearance rates hovered around 51 percent and 47 percent, respectively.
However, instead of moving away from auctions altogether, real estate insiders told SBS News that some sellers are adapting their approach. While they leverage the publicity an auction campaign provides, decreased clearance rates have made them more willing to consider and accept strong offers earlier in the process.
Auctions aren’t disappearing, but the strategy may be changing
Auctions have been a defining feature of Melbourne and Sydney’s property markets for years and have grown in popularity elsewhere.
Agents and vendors often opt for them because clear competition between buyers can push priced higher.
But in softer conditions, the process can create different pressures.
Jacob Caine, president of the Real Estate Institute of Australia, said that auctions remained an effective selling tool in many markets, but vendors were becoming more selective about how they approached campaigns.
He said rather than looking at broad city-wide trends, agents were increasingly focusing on “micro-markets”, local conditions, buyer behaviour and property type.
“Some areas will continue to push through with auctions because that’s the most effective mode of sale, and some areas will reconsider and transition into alternative approaches,” he said.
Caine said there had been a slight shift toward private treaty and expression-of-interest campaigns in some areas because they allowed owners more flexibility to test the market.
At the same time, auction campaigns themselves were evolving.
“We know across Melbourne and Sydney right now agents are very much open to, if not encouraging, early offers from interested parties,” he said.
Sellers may be prioritising certainty over competition
Domain chief residential economist Nicola Powell said the listing platform’s data suggested sellers were increasingly making decisions before auction day.
Powell said that sold-prior activity remaining relatively strong, even as auction conditions weakened, may reflect changing seller behaviour.
“If they don’t feel they have the buyer depth needed to create competition under an auction setting, sellers become much more open to accepting pre-auction offers,” she told SBS News.
Powell also suggested auctions could still be attractive because they create urgency and generate strong visibility.
But she said higher sold-prior activity and rising withdrawals before auction often emerge when sellers become less confident they will achieve their target price under the hammer.
“Higher withdrawals signal market conditions are weakening,” she said.
“It tells us either the seller isn’t able to achieve the price they want or they just don’t have the buyer depth to create that successful auction environment,” she said.
Experts say buyers have become more cautious and deliberate in recent months, creating a market where sellers may be more willing to lock in certainty.
“If you get that offer prior, particularly in a soft market, sellers are much more likely to accept it over taking the risk of auction,” Powell said.
Vendors are adjusting expectations
Kathryn Fantov, the director of a Sydney-based vendor advocacy company, said the shift was becoming visible in how sellers approached campaigns.
She told SBS News that vendors had become more cautious than they were six to 12 months ago and were increasingly prepared to consider early offers.
“When a strong offer comes in, vendors understand they need to seriously consider whether that could be the best offer that buyer has,” she said.
“If we say no and think we can get more at auction, there’s a very big chance they’ll potentially just walk away.”
Fantov said that auctions were still suitable for the sale of some properties because of the urgency they created, but vendors were becoming more flexible around timing and expectations.
“Six to 12 months ago, it was more of a seller’s market,” she said.
“Now sellers need to adjust expectations around price and timing.”
Stephanie Farah, partner and sales at a real estate agency in eastern Sydney, suggested that flexibility was echoed by agents working directly with vendors.
She told SBS News that campaign structures had not necessarily changed dramatically, but the conversations around pricing had, and highlighted that some campaigns were being extended beyond the traditional auction window to allow more time to find the right buyer.
And rather than pushing vendors toward a particular outcome, she said agents were increasingly focused on giving sellers options.
“The best price they’re probably going to achieve in the next six months may be today,” she said.
Farah said many vendors entered campaigns anchored to prices achieved months earlier, despite changes in buyer behaviour.
She warned one of the biggest mistakes sellers could make was assuming conditions would improve, and urged vendors to recognise that waiting to sell may not lead to a better result in a softer market.
But property market figures told SBS News that while lower auction clearance rates do not necessarily mean homes are not selling, softer conditions may be making sellers more flexible about how and when they secure a result.