Last month’s record-breaking auction result in Bulimba, which saw a waterfront mansion sell under the hammer for $8.4 million, has set tongues wagging about the role of auctions in the Queensland property market.
Earlier this year, the previous record was met – ten years after the last record-breaking result – when a New Farm property sold under auction for $7.75 million.
Last month saw a couple of other multi-million dollar auction sales too, with properties in East Brisbane and Kalinga going for $4.8 million and $2.05 million respectively.
“There have been some fantastic auction results in Brisbane over the past few months, which is wonderful to see,” says REIQ CEO Antonia Mercorella.
“These lucrative sales are indicative of the subtle market changes which are becoming increasingly evident in Brisbane, in line with expert predictions of an upwards swing for our property market.
“Whether these sales are an indication of a change in attitude towards auctions locally remains to be seen, with Queenslanders traditionally steering away from this method of sale.”
Brisbane held between 85 and 105 auctions per week throughout the month of August, just 7.7 per cent of the total number of auctions across all capital cities considered.
During the same period, Adelaide and Canberra held less than 80 auctions per week, on average, with Perth holding less than 40 and Tasmania less than 4.
It’s a different story in Melbourne and Sydney though, with up to 662 and up to 503 auctions taking place per week respectively.
“Auction is more popular in Sydney and Melbourne than anywhere else in Australia,” says Propertyology Head of Research, Simon Pressley.
He says the reason for that is partly cultural, with auctions quite common in these capital cities as far back as the gold rush era and beyond.
The different contract processes among the states also comes into play.
“The contract process for transacting real estate in New South Wales is very different to Queensland,” he says.
Even under a NSW private treaty sale, buyers are provided with some property searches up front and they usually complete all of their due diligence on a property before making a formal offer.
Whereas, in Queensland, buyers typically make a formal offer and then have 7-14 days to complete due diligence.
“So buyers in states other than NSW just aren’t accustomed to buying under the extra pressure of auction conditions,” says Mr Pressley.
No doubt, the past ten years has seen Brisbane’s auction market mature, with anecdotal evidence suggesting increased diversity among auctioned properties, as well as a broader range of prices ranges and market conditions.
“The number of auctions in Brisbane has been increasing consistently higher over the past 10 years,” says Place Estate Agents auctioneer Peter Burgin.
“The only exception that I have experienced is the last financial year, where the market has been effected by some exceptional forces.
“The Federal election and the Royal Banking Commission collectively played a significant role in challenging our market like never before.”
But in the last two months, the Brisbane market has experienced a massive injection of energy, he says, which has seen the volume of auctions increase, along with the number of bidders registering to purchase at auction.
“The results have been anywhere between really strong to potentially life changing for sellers.”
Traditionally, a lack of clear position within the marketplace has been the clear catalyst for a Brisbane property to be sold via auction, with vendors throwing to the public to help ascertain their home’s value.
“Aside from Sydney and Melbourne, the most common situations for a property being sold via an auction campaign are more expensive properties and/or if a property has something unique about it,” says Mr Pressley.
“There’s often a very limited comparative property sales for vendors and sales agents to confidently evaluate market value so the rationale is often to sell without a marketing price and put it to auction.”
But Mr Burgin says the public perception that auctions only lend themselves to certain properties is a misconception.
“This attitude is slowly changing with more and more lower price properties using the auction process to great effect.”
With a national increase in awareness of the auction process, thanks to the frequent and widespread reporting of clearance rates, along with its prevalence on real estate focused television programs, a turn of the tide seems possible, even probable.
Add to this an increasing local migration to Queensland from the southern states, and the number of vendors comfortable with the concept of auctions may start to rise, although that sentiment is likely to be over the long term.
Mr Burgin agrees that increased awareness and education is likely to have a positive impact on Brisbane’s auction rates, and says a lack of understanding of the auction process holds many vendors back.
“There are a number of reasons for lower auction rates in Brisbane compared to other markets,” he says.
“One is perception of auction success based on advertised clearance rates hovering around 40 per cent to 50 per cent.
“This is a really poor barometer for the success of an auction. The only way to truly make a comparison between auction and private treaty would be to advertise the percentage of properties sold unconditionally at auction on any given day, versus those offered via private treaty that have sold unconditionally on the exact same day.
“I can assure you the results would favour auction every Saturday without fail.”
In the short term though, auction rates in Brisbane are likely to follow a similar pattern to what they have done over recent history, with traditional sales providing the feeling of comfort Queensland vendors are accustomed to.
“Queensland vendors may be reluctant to bear the costs associated with preparing their home for auction, without the guarantee of a sale taking place.
“However, both buyers and sellers are becoming more educated about the auction process, and recent sales results demonstrate that selling via auction have a very positive outcome.
“Auctions also afford vendors a much shorter campaign period, with buyers encouraged to act with a sense of urgency.
“There’s also the chance a vendor might get an offer before the auction takes place.”