Melbourne’s new auction rules could be costing vendors buyers, with calls to allow sellers to lower their reserves within seven days based on open home feedback to avoid delaying sales as market conditions shift.
The Melbourne auction market’s first weekend under the new regulations delivered mixed results, with a slightly stronger preliminary clearance rate, but from far fewer auctions.
Cotality data showed Melbourne’s auction clearance rate edged up from 54.8 per cent to 56.2 per cent in the week ending 18 October but remained 10.2 percentage points below last year.
The city also reduced its auctions, with 500 properties scheduled in its first week under the new reserve-disclosure rules, down from 703 the previous week, accounting for 203 of the 326 fewer auctions across the combined capitals.
Cotality economist Annabelle Mezieres said vendors auctioning from 16 October had to disclose their reserve at least seven days beforehand, requiring them to settle on a price before auction day.
“Some campaigns may have been brought forward to finish under the old rules, and others postponed to meet the new timeline,” Mezieres told REB.
“The dip in auction activity may suggest that some potential vendors are waiting for a clear picture around the regulatory changes before entering the market.”
According to Barry Plant chief auctioneer James Hatzimoisis, the rules could complicate pricing in a weak market, forcing vendors to delay auctions if fresh buyer feedback prompted them to lower their reserves.
Under the new rules, vendors must disclose their reserve seven days before an auction.
Any change to the reserve before auction day would trigger another seven-day wait, potentially delaying the sale even when a lower reserve could help secure a buyer.
“We’re hearing some buyers are saying, ‘Well, that reserve is too high. I’m not even going to come along to that auction,” Hatzimoisis told REB.
“If a vendor wants to move their price or their reserve down within seven days, they should be able to do that,” he said.
Traditionally, Hatzimoisis said agents received valuable buyer feedback in the final days before an auction, including after midweek open homes, helping vendors assess whether their price expectations were realistic.
“If vendors want to decrease their reserve based on market feedback, I can’t see why they’d have to wait another seven days again.”
He said that allowing vendors to lower their reserves could help align price expectations, reduce the number of properties passed in and support more transactions in a market where confidence is already weak.
“While publishing a reserve helped buyers make more informed decisions, provided they understood how the rules worked.”
Buyers need to understand the new rules
While the new rules aimed to improve transparency, Hatzimoisis said the advertised price was adding to buyer confusion.
He said some buyers misunderstood what an advertised reserve meant, with some assuming a property could not sell below that figure.
As a result, some buyers were choosing not to attend auctions, considering the advertised reserve too high, only to see the property sell for less.
“They don’t come to the auction because the reserve is too high, and then the property ends up selling for less, and they would have participated in that case,” Hatzimoisis said.
He said some properties had sold for $20,000 to $50,000 below their advertised reserves, potentially leaving buyers who had ruled them out with a missed opportunity.
According to Hatzimoisis, buyers needed more education on the new rules, as vendors could still accept a price below the advertised reserve once bidding began, while competition could push the final sale price above it.
“The difference before was that the reserve price wasn’t advertised. Now that it is, it’s allowing buyers to make, I suppose, in some ways, a more informed decision for them,” Hatzimoisis said.
“But what they need to understand is that it still may sell for less and it may sell for more depending on competition.”
The challenge, he said, was ensuring buyers understood the reserve was not a guaranteed sale price, but a reference point to help them assess the property and prepare for potential competition.
Agents to step up communication
To attract buyers, Hatzimoisis said Victorian agents would need to step up their game, improve service, and stay in closer contact with prospective buyers.
He said agents should contact every buyer who had enquired about a property or attended an inspection to gauge their reaction to the advertised reserve and whether they considered it reasonable.
That feedback could help vendors make more informed pricing decisions, rather than relying on expectations that no longer reflect buyer sentiment.
“The agent really is the conduit between a buyer and a seller,” Hatzimoisis said.
“If an agent is able to get the information from buyers to relay it to sellers, to let them make an informed decision based on actual feedback, that’s going to help the whole journey for everyone involved.”
Despite the initial confusion, Hatzimoisis maintained that auctions remained an effective way to sell a property when the method suited the campaign.
“The auction method is still a fantastic way to sell a property, in my opinion, the best way to sell a property as long as it’s the right property for that sort of campaign,” he said.
Flatter run to Christmas
Hatzimoisis expected Melbourne’s spring selling season to be quieter than usual, with auction volumes already well below previous years and buyers and vendors remaining cautious.
He said this week’s weaker results reflected a broader market shift, with prices declining, days on market increasing, and vendors holding back from listing their properties.
“We’re not seeing increases, we’re seeing it shift downwards,” Hatzimoisis said.
He expected the next seven to eight weeks to remain subdued, despite spring traditionally being one of the busiest periods for property sales.
Hatzimoisis said government policy and interest rates had weighed on confidence, leaving buyers more cautious and vendors reluctant to sell.
Additionally, he said that private treaty sales may become more common in the short term as vendors sought to avoid reserve disclosure, but auctions would remain strong once the market understood the new rules.
“We may see more private sales in the short term, but I think that the process or the system, the auction system, will still be strong once everybody understands all this new legislation,” he said.
He also expected pent-up demand to emerge when confidence returned, potentially bringing more buyers and sellers back into the market.
Want to see more stories from trusted news sources?Make Real Estate Business a preferred news source on Google.
