Auction rates reflect quieter market

Auction clearance rates are noticeably down but experts say that doesn’t mean it’s a sign the end of the road is nigh for a strong housing market.

Thursday, March 2nd 2017, 2:00PM

by Miriam Bell

According to the latest REINZ data, auction sales are steady with 280 dwellings nationwide sold by auction in January.

This represented 7% of all sales and was a decrease of 138 (-33%) on the number of auctions in January 2016, when 418 dwellings sold at auction.

The bulk of auction sales were in Auckland and Waikato/Bay of Plenty, with the two regions accounting for 51% and 26% of the total respectively.

Back in July 2016, before the latest investor-focused LVRs started to impact on the market, 1,674 dwellings nationwide were sold by auction

This represented 23% of all sales and was a decrease of 221 (-12%) on the number of auctions in July 2015.

Auckland transactions accounted for 61% of the total, which was down from 74% in July 2015.

While the traditional summer slowdown has to be taken into account in January’s reduced auction sales rates, anecdotally action on the auction circuit is significantly quieter than it was last year.

A recent example can be found in Barfoot & Thompson’s auction results for the week ending February 17: 172 properties were up for auction and 38% of them sold under the hammer or by 5pm the next day.

When the market was at its hottest, auction clearance rates could be as high as 80%.

Property Institute chief executive Ashley Church said the frenzied bidding wars that were recently a common sight at auction are not currently in evidence.

Auction clearance rates are a reflection of the market at a given time, he said.

“Right now, the LVRs’ are impacting on buyers and the market has definitely slowed down. And with the more moderate market, comes more moderate auction behaviour.”

But, in his view, it’s not fair to say that current auction clearance rates are a reflection of a broader trend in the market.

Church said auction clearance rates are indicating the mood of the market right now, but the market will probably pick up in a few months’ time and clearance rates will the reflect that.

“The LVRs will continue to have a moderating effect on investors, but house price growth will continue. It will just be at a more modest level than we have seen in recent years.”

Harcourts CEO Chris Kennedy agreed that auction clearance rates have reduced slightly of late but said that perceptions of the market could be influencing that.

“Given the time of year, there hasn’t been a significant reduction in auction clearance rates – although there has been a slight change in auction activity and some moderation of auction behaviour.

“Probably more re-education of sellers on the sort of prices needed to meet the market expectations is required to address this.”

It has been widely reported that the market has slowed down and such coverage tends to have a big impact on perceptions, he said.

“Yes, we were in a particularly good market for quite some time. There was 15% house price growth last year which is great.

“But the current market is not a bad market, it is still a good market. We might not be looking at the same level of growth this year, but we are still looking at a solid 5-7%.”

The top is not going to come off the housing market, he added. “The market is simply realigning and current auction clearance rates are a reflection of that.”

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