Investor says property market ‘tanking’ and auctions have had their day

Andy Thackwray has been investing in property for 20 years, and on Friday he saw his daughter’s Whenuapai property join a dozen others as it failed to sell under the hammer.

Only two of the 14 properties in the Barfoot & Thompson Auckland auction have sold, with the rest being passed on.

Thackwray doesn’t mince words – he says the market is about to crash and the auctions have run their course.

“Auctioning is a good thing to do if you’re in a price range where you’re going to get a lot of interest and there’s a lot of people in a position to buy,” he says.

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The pace of auctions at Barfoot & Thompson's offices in Shortland St, Auckland has slowed noticeably from a year ago.

Abigail Dougherty / Stuff

The pace of auctions at Barfoot & Thompson’s offices in Shortland St, Auckland has slowed noticeably from a year ago.

But with the market shrinking and a “perfect storm” of rising interest rates, tight lending and rising inflation, Thackwray says that’s not the reality most sellers face. are faced.

He sold two of his properties last year after being convinced the market would fall and said prices could fall by 10% and properties in the first-time buyers’ market and those for development could fall by 20%.

He says the family decided to auction because the market had not yet turned when his daughter’s property first came up for sale. His advice to those selling today is to try to sell quickly.

The Whenuapai property auction proceeded like many others have recently.

The auctioneer began by extolling the virtues of the house – its 950 square meters of land, its new ventilation system, its proximity to the highways – before opening the auction at 1.2 million dollars.

When no hands came up, he opened it for offers, and after three calls, ownership passed.

Thackwray says there was a bidder in the room and other parties with conditional offers are interested.

The result in the auction room on Friday becomes mainstream.

Andy Thackwray has been investing in real estate for 20 years and says a

JASON DORDAY/Stuff

Andy Thackwray has been investing in real estate for 20 years and says a “perfect storm” is brewing which will send the market crashing.

At another company auction in Auckland on Tuesday, seven out of nine properties passed. A tenth was withdrawn before the start of the session.

Scenes like this are a far cry from what happened at the same auction hall last year, where bids came in quickly, expectations were shattered and a central Auckland property without a toilet went awry. sadly sold for over $2 million.

At a Harcourts auction in Wellington on Friday, one of four properties under the hammer sold, with the rest slipping away.

Christchurch was the exception, with an auction on Wednesday 21 of 33 properties selling under the hammer.

Sellers walk away from auctions

As a large number of properties do not reach reserve, sellers walk away from auctions.

Statistics from real estate data firm CoreLogic show nationwide that the proportion of properties auctioned as the first method of sale has fallen from around 35% last year to 20-25% this year.

In Auckland (which has long been the center of auctions with half of all auctions taking place in the city), around 60% of homes were auctioned for the first time last year – a figure that dropped to 40% this year.

Similar trends can be seen in other major centres, except in Wellington, where CoreLogic valuations manager Nick Goodall says only around 5% of homes sold under the hammer in 2021.

CoreLogic's Nick Goodall says auctions are old-fashioned in a down market.

Provided

CoreLogic’s Nick Goodall says auctions are old-fashioned in a down market.

“Christchurch has seen the percentage of bids increase throughout 2021, rising from around 40% to 60% at the end of the year. So far this year, that share has fallen to 50%,” says Goodall.

Tauranga has fallen from 70% in 2021 to around 50%, and Hamilton has also fallen.

Goodall says the abandonment of the auction reflects a declining market.

“There’s less demand and competition for properties which are usually the things that make auctions so popular,” he says.

Trade Me data also shows bidding falling

Trade Me Property sales manager Gavin Lloyd said the number of properties on the market had now reached pre-Covid levels.

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Trade Me Property sales manager Gavin Lloyd said the number of properties on the market had now reached pre-Covid levels.

Trade Me property sales manager Gavin Lloyd said last month that 17% of properties listed nationwide were up for auction, up from 26% in February 2021.

The same comparison increased the proportion of properties offered for sale by “survey on” or “price by negotiation” from 42% to 49%.

Lloyd says this is happening at the same time as the number of properties for sale across the country is rising, rising by more than a fifth year-on-year and reaching pre-Covid levels for the first time.

In the Auckland region last month, 24% of homes were up for auction, which Lloyd said is a marked drop from February last year, when 41% were up for auction.

Wellington is also showing strong signs of moving towards a buyers’ market, with Trade Me reporting that supply in the region rose 71% in February from a year earlier, while demand fell 8% .

Auckland associate professor Mike Lee explains that just because a property didn't sell at auction doesn't mean the seller wouldn't get a good price.

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Auckland associate professor Mike Lee explains that just because a property didn’t sell at auction doesn’t mean the seller wouldn’t get a good price.

Auctions, a “multiplier” of buyer sentiment

Mike Lee, associate professor at the University of Auckland, specializes in buyer behavior and consumer psychology.

He describes auctions as a buyer sentiment multiplier – when the market is hot and FOMO (fear of missing out) is high, an auction will increase the heat as buyers compete.

When the market goes down like it appears to be right now, it works backwards, Lee says, and can throw cold water on a property, devaluing it in the eyes of buyers and possibly encouraging them to make lower offers.

“They (auctions) show you very clearly when no one is interested, and no one is willing to take a chance, or no one thinks it’s worth what the seller thinks it’s worth.”

Lee says the houses were such a desirable investment, a nice property in a good neighborhood will always be an easy sell.

For less desirable homes, it may be better to stick to bidding rather than letting sellers try their luck at auction, he says.

Harcourts national auction manager Aaron Davis said other than the auctioneers' fees, the auction does not involve any additional expense for owners.

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Harcourts national auction manager Aaron Davis said other than the auctioneers’ fees, the auction does not involve any additional expense for owners.

Auctions remain “the best of the others”

Harcourts national auction manager Aaron Davis disagrees with Lee and says the auction is going nowhere.

He says that because auctions deal in cash, they avoid the pitfalls that come with conditional offers.

“Auctions have been around for 2,000 years, especially now that they are becoming more important because silver is the only credible currency,” he says.

Davis says that even if there is only one cash buyer in an auction room, that bidder is still competing against those waiting in the wings with conditional bids, and will therefore always bid. to secure property.

He says good quality homes will always sell at auction and it will be the lesser quality market that will turn to other methods of sale.

“The flight is towards quality now. A year ago, they (buyers) had to buy everything.

Expenses

Bidding also comes at a cost in the form of an auctioneer’s fee, which Davis says typically runs around $800.

Wellington-based Harcourts auctioneer Darryl Harper says Wellington has traditionally had few auctions because many agencies lack the skills to run them.

Provided / Stuff

Wellington-based Harcourts auctioneer Darryl Harper says Wellington has traditionally had few auctions because many agencies lack the skills to run them.

Wellington-based Harcourts auctioneer Darryl Harper charges $690 and says the amount varies depending on location, auctioneer and company.

He’s worked in the industry for 23 years and says auctions haven’t had their day because they were an effective way to find out what sellers would pay for a property and were useful for flushing out cash buyers.

“If there is no money [buyers]it eliminates contingent interest, and we just work with it from there.

Harper attributes poor auction performance recently to tougher lending rules under the Credit Contracts and Consumer Credit Act which came into effect in December and are currently being reviewed by the government as to whether how they apply to mortgages.