The type of Melbourne homes that are passing in at auction

Not all homes are faring equally as Melbourne’s auction market starts to slip this autumn, and buyers are cautious about properties that need renovation or have lofty price hopes.

Melbourne’s auction clearance rate weakened to 59 per cent last weekend, below the level of 60 per cent that analysts consider to be an indicator of a balanced market, after last week’s interest rate rise and amid uncertainty about the global economy.

Some homes are passing in at auction due to flaws with the property itself, while others pass in because the sellers expect more money than buyers are willing to pay, or because the buyers do not qualify for government help to purchase.

Buyer’s agent Wendy Chamberlain said entry-level homes were more sought-after at auction than more expensive homes, although the homes that pass in at auction often sell after.

She noted that first home buyers can access government support, such as the Australian Government’s 5% Deposit Scheme which is available for Melbourne properties worth up to $950,000.

“The market at the moment is quite patchy,” she said. “With the way that things are with the cost of living, and conflict, people are starting to be conscious of their money.

“The sub-$1 million bracket seems to be doing quite well. The homes passing in seem to be bigger homes and more expensive homes.”

She said homes in the lower price brackets that are priced well are performing well at auction, but those that lack key features – a guest room in a townhouse, for example – draw less interest.

For example, she recently bought a client a home in Port Melbourne for which nobody bid, and she was able to negotiate a deal afterwards subject to a building and pest inspection.

Marshall White group sales director John Bongiorno said the reason homes have been passing in is “generally they are overpriced”.

“Everything is transacting but the market is very price-sensitive,” he said.

He said the first home buyer market under $1 million is the strongest part of the auction market now.

Buyers are also mindful of the cost of renovating. “I have got a couple of properties I am involved with that need a little bit of work and it just comes down to price sensitivity and what the costs are to do the work,” he said.

“If you get the price right you can sell your property.”

Prestige buyers’ agent Emma Bloom, from Morrell and Koren, said turnkey properties are the “heroes” in this market.

“Anything that needs work is definitely, they are the ones that are not getting the same competition and result, because people don’t want to spend money on the renovation,” she said.

“It is expensive, there is uncertainty around the building industry … Anything that is ready to move your clothes into, that will have more success and competition.”

She said at the middle and top end of the market, many homes are not being taken to auction and are instead being offered via expressions of interest campaigns, although the lucky ones go to a boardroom auction.

“Everybody is gun-shy to put their hand up and compete in an open forum,” she said.

Ray White chief auctioneer for Victoria and Tasmania Luke Banitsiotis said some home owners were still hoping to sell for prices that may have been on offer at the end of last year, before cost of living concerns and geopolitical worries re-emerged.

Rather than there being a specific type of home that is more likely to pass in, “it is probably types of owners,” he said. “Ones that are holding onto the fact their property may have been worth x three to four months ago.”

To illustrate the benefits of pricing accurately, he highlighted an auction in East Melbourne last weekend that attracted seven bidders.

However, he said homes that appeal to a broad range of buyers such as families, downsizers and investors are often still attracting healthy competition.

He encouraged prospective vendors to ask agents for data to back their appraisals, and current vendors to meet regularly with their agent, at least once a week, because the market is moving.

If they had scant interest after early open homes, “as an owner, you have probably got to be sitting there going, ‘maybe we are a little bit off. Maybe we wanted $800,000 but maybe it is only $750,000.’”

His suggestion to buyers was to place a bid even at a quiet auction to make sure the home passed in to them, giving them the chance to negotiate exclusively with the seller at the reserve price, rather than facing immediate post-auction competition.