Are we witnessing the death of auctions in real estate?

According to the latest Great Southern Bank No Place Like Home report, the auction process has become increasingly unappealing for Australians as more buyers feel more at ease purchasing a home when the process is guided, rather than fast and competitive.

The data showed that over 40 per cent of Australians preferred buying a home via a private sale with a real estate agent, followed by 35 per cent who preferred working with a broker, and 27 per cent who would rather deal directly with the property owner.

LJ Hooker's group head of research and business intelligence, Mathew Tiller, said that buyers’ hesitation at auction stemmed more from uncertainty about bidding strategies, rules, and the process rather than from the format itself.

“Buyers might only attend one auction in their life,” Tiller told Real Estate Business.

“Buyers are uncomfortable putting their hand up on the day, some might not really understand the process and what’s involved, and get a little bit overwhelmed with the situation.”

The lack of trust in auctions has also been felt in the market, with Cotality data showing that recently, one in five auctions have been withdrawn, and the clearance rate has been below 60 per cent.

Tiller said the softer clearance rates reflected current market conditions, with slower buyer decision-making driven by interest rate rises, cost-of-living pressures and economic uncertainty, alongside an above-average volume of auctions.

In order to help their sellers go through the auction, Tiller said it was up to real estate professionals to ensure buyers were properly educated and comfortable with the bidding process.

“From the get-go, agents have to let buyers know that obviously the property is being listed for auction, and then help them get an understanding of the process, ensuring that they know the rules, the regulations, legislation that also comes with an auction.

“Which will then help them be comfortable on auction day, and they’ll put their hands up as they’ll have all the information.”

According to Great Southern Bank data, among Australians who feel comfortable attending auctions, nearly one in three believed auctions could help them secure a better price, while 27 per cent said auctions offer greater control over the buying outcome.

Tiller said that while many buyers believed auctions would not offer them a competitive price, the process was more transparent than that of a private treaty sale, as it helps agents gauge pricing and interests during the campaign.

“I think some buyers do like auctions because of the transparency that it gives; it's out in the open, everyone's bidding against each other.”

Additionally, he said that the property market itself had also been a determining factor in whether buyers engage more at auction.

In stronger markets with limited listings and intense competition, Tiller said that buyers often try to avoid auctions by submitting early offers to secure a property and reduce the risk of missing out.

In softer markets, however, he said buyers may benefit from reduced competition and fewer bidders attending auctions.

“It'll be interesting to see if the market does soften over the course of this year, does that change the buyers, the buyer's consideration of auctions? Because in a softer market, maybe they can benefit from less competition.”

Ultimately, Tiller said that if buyers were uncomfortable with the auction process but had no other choice, they could always engage a buyer agent to negotiate on their behalf.

“We’re seeing more buyers engage buyer’s agents to attend auctions on their behalf, using professional guidance to navigate the process for properties they really want,” he concluded.