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CASE STUDY: A luxury home was auctioned in Merewether (a beachside suburb in Newcastle, Australia) on Saturday by an agency that we can call “Agency X”. It was a fascinating experience for a number of reasons, notwithstanding the fact that it didn’t sell.
Marquette Turner Luxury Homes have a wonderful property for sale in Merewether at the moment which is one of the finest in the city and our interest in the result of the other property being auctioned was understandable. We were lucky enough to have a representative (Person Y) at the auction that was able to summarize the experience.
Person Y was stunned by the number of neighbours who walked to the house just before the auction – it was obvious that none of them were likely buyers and if Person Y was a serious bidder “stalking” the crowd to find who may be a competitor then the game would almost certainly be up for Agency X. Person Y didn’t see anyone holding an auction number and also didn’t see anyone register for the auction. Person Y felt certain that the crowd contained no bidders and that neighbours were out to see what was happening.
Person Y wasn’t a fan of the location of the property and found it a little hard to locate. Person Y also thought it would be a very specific buyer as the home didn’t have broad appeal and more importantly had a price expectation in the vicinity of $2million.
In 2007 in all of Australia only 3.65 % of residential property sold for more than $1 million. In other words the target market for a home of that value in Newcastle is extremely small and the likelihood of several competing parties after a short 4 week campaign was always going to be low in even the best of markets.
Given that the property has now passed in and a vendor bid has been placed at $1.9 million we have to ask why that strategy was chosen? Auctions in Newcastle are statistically unreliable so very little data is available and given that buyers are looking for reasons to offer less and buy a bargain surely this plays into their hands? Can it be concluded that the home is overpriced, undesirable or that something may be wrong with it? Was auction really the right thing to do?
Using a specialist Luxury Agency is vital to achieve the best possible price and has never been more important than now.
Michael Marquette and Person Y
MORE INFORMATION: Read other articles regarding auctions
Auction Clearance rates for the week ending August 10, 2008 continued to show an uncertain market where buyers and vendors are struggling to find common ground. Low price expectations from would-be bargain hunters are making it difficult for many vendors to make decisions on auction day and Luxury property continues to perform poorly at auction.
Properties below $1 million are the best performers at auction right now with Melbourne leading the way with an overall Clearance rate of 55%. Sydney is steady at a clearance rate a little over 43% with Perth performing worst of all Australian Capital cities with a dismal clearance rate of just over 15%.
The figures for the week ending August 17, 2008 will be available shortly and I hope to see an improved result with expectations of an interest rate decrease growing. We eagerly await the announcement from the Reserve Bank.
We at Marquette Turner Luxury Homes have been urging our Luxury clientele to sell by Expressions of Interest and we are experiencing high levels of success. Whilst this is a strategy less commonly used below $1million, we find that the flexibility it enables for all parties very much assists in the ultimate sale of properties.
This table is compiled with the assistance of RP Data for the week ending August 10, 2008.
It has always astonished me how many real estate agents advise everyone they meet to auction their home. In Regional cities like Newcastle this happens all too often with the inevitable result of the property passing in, and in most cases not even receiving one bid from a potential buyer.
The process is horrendous for vendors who quite often have their hopes set high only to have them come crashing down on auction day. Potential purchasers use the fact that the property passed in to show that there is little if any interest in the home and accordingly offer much less for the property or just wait for the price to continue falling in the hope of snapping it up for a bargain price.
This is even truer when looking at Luxury Homes in sort after suburbs in Newcastle like The Hill, Bar Beach and Merewether. Twenty seven (27) homes were put to auction in the Hunter yesterday with only eight selling, for a clearance rate of just thirty percent (30%). Even more interesting is that the highest price paid for a property sold at auction yesterday was just $452,000!
It is more important than ever to choose an agent with the experience, qualifications and knowledge of the Luxury market when selling your home. The one size fits all approach simply doesn’t work when selling Luxury Homes and is even more important when selling property in Regional cities.
Here are Australia’s auction clearance rates for the week ending 20 June 2008.
Source: RP Data