Melbourne is widely regarded as being the auction capital of Australia – if not the world!
Why are there so many auctions in Melbourne?
Culturally speaking, the “street theatre” sale method of public auctions has been ingrained into the psyche of property owners in the garden state. Melbourne’s auction history reaches back to its settlement days when assistant surveyor-general Robert Hoddle auctioned the city’s first 100 blocks of Crown land on June 1, 1837. Melbourne has more properties sold at auction than any other capital city despite having a smaller population than Sydney. Brisbane has the third highest auction rate, however has only 10% of the volume that is sold in Melbourne.
Auctions in Melbourne had typically been limited to the higher demand areas of the eastern suburbs until the late 1980’s when the trend started to spread further to outer areas, and also back to the west and north of the city. The introduction of pre-approved lending by banks further spurned on the number of buyers able to contest an auction with a solid budget.
Not all suburbs within Melbourne are geared towards auction sale methods however. The areas best suited to auction sale methods are generally suburbs with an unequal supply vs demand ratio. The reason being that auctioneers can induce two or more bidders to fight it out to a higher price than if it was just the auctioneer and a lone bidder. Therefore, sale methods can change even within the same suburb depending on the state of the market and even time of the year.
In Melbourne, auction season begins in late February and has a number of breathers during the year as families take school holiday vacations. The other factor affecting the auction season in Melbourne is the number of sporting events on the calendar. Events such as the Formula 1 Grand Prix in March, the AFL Grand Final in late September, and the Spring Racing Carnival in late October / early November all take precedence over the auction season. Momentum with an auction campaign is very important to the vendors, so having a 4 week marketing period prior to the auction is paramount. Because of this, the bulk of auctioned properties are offered to the market in the time between the AFL Grand Final and the Melbourne Cup. It also happens to coincide with Spring’s sunny days and flowers in bloom which help gardens look better and people’s moods brighter.
That being said, you’ll find auctions are most prevalent in seller markets which can be at any time of year outside of January. Seller markets are defined as the seller having the advantage or upper hand over the buyer. This occurs when the demand is greater than the supply. Sometimes you can also have artificial demand being led by the media. Newspapers need headlines to sell, so there’s nothing quite like talking about boom or gloom. Anything in between is of no interest to anyone. Newspapers also sell.. you guessed it.. advertising. Property sale advertising. It would be facetious of us to imply that there is any correlation between editorial content and marketing content. So we simply won’t imply that.
The public street auctions are not the only auctions that take place in Melbourne. Some suburbs are geared more towards being a buyer market, where buyers have more choice over a larger amount of stock on offer. Mostly, this also means that properties are sitting unsold on the market for sometimes months at a time. To avoid the time lag of a private sale, there is a sale method which was introduced to generate some urgency and momentum for properties that have less buyers showing interest. This sale method is referred to as “sale by set date”, or “expressions of interest” as it is known in the top end of Melbourne’s inner east. Essentially, this sale method is designed to bring the ingredients of an auction in to play but leaving out the critical component for a buyer – being able to see your competition. This immediately gives the seller the upper hand in an otherwise buyer market. By giving the sale campaign an “end date”, it forces buyers to make their best offer and hope they are the highest at the end. The dangers here are that you could easily be influenced by the agent to pay too much when in fact there is either little or no competition you are bidding against. On the other hand, you could assume the agent is bluffing and put in a conservative offer only to miss out to another higher bidder.
We’ve dealt with all types of sale campaigns, all types of agents and all types of selling tactics. We’ve seen it all before and we know how to think quickly on our feet while under pressure. In fact, we thrive on it!