Shopless Press Release
Over the past year house prices in New Zealand have continued to rise rapidly. However the median length of time a house was on the market extended from 27 days to 29 days. Factors such as the lockdowns over 2021 contributed to a slow in the median home sale across New Zealand. But one thing that has increased significantly is the preferred method of sale. New Zealand homeowners are predominantly choosing to sell their home by auction. With the two most popular methods of sale in the past year being auction followed by deadline sale or tender. Shopless looks into why New Zealanders are choosing to sell their home via auction. Outlining what the benefits and drawbacks are for buyers, sellers and real estate agents.
The Rise in Popularity of the Auction
Between 2021/22 around 50% of homes sold across New Zealand were sold by auction. In some areas such as Auckland and Christchurch this was as high as 60% of homes in the city. This is a significant rise from 2018 and 2019 statistics that showed only 10-20% of homes across the country were sold at auction. The one city that avoids this trend is Wellington where 5-10% of homes were sold via auction in 2021. The most popular method of sale in Wellington was tender. However the Wellington region has also seen a slight increase in the homes sold by auction.
One of the contributing factors to the rise in popularity of the auction was the increased price of home sales. Homes were often selling 10-15% above the estimated rateable value. Therefore auctions allowed for the ambiguity of the higher price to be solidified. If there were more parties interested in paying a higher price, then the idea is that the highest possible price would be paid for the property. Additionally a home sold by auction is often not advertised with a price, this is intended to broaden the amount of cash-in-hand buyers viewing the home. Reducing the amount of conditional offers that may have more clauses attached to the sale.
The Benefits of a Home Auction
The increase in auctions in NZ is also indicative of the current property market and may not stay as it is. There are many benefits to listing a home via auction. Primarily if the market is seeing a high number of sales that are over the current valuation prices then hopefully the homeowner would get a satisfactory price for the property. This is also a benefit for real estate agents or agencies who receive a percentage of the sale as commission. Additionally it means the property will likely be sold within the given time frame of the auction. For buyers it means that there may be a smaller pool of buyers bidding in the auction, and if the auction does not meet your top price it will hopefully save extra expense.
The Setbacks of a Home Auction
On the flip side, if the market were to slow or for other reasons the homeowner may receive a lower price than desired or anticipated. Additionally a homeowner may feel pressured into a home sale with an auction. And for real estate agents most complaints are raised when a homeowner feels pressured by an auction. For first home buyers auctions can be particularly deterring as they may be waiting for other means such as kiwisaver and first home grants to secure the home. Additionally buyers can also feel that pressure to go higher than their means in order to purchase the home.
If you are considering purchasing or selling your home at auction it is important to fully understand the process. Many sources suggest that auctions will continue to be New Zealand home sellers’ preferred method of sale. Therefore learning about the auction process in the New Zealand market is important for any homeowner or prospective buyer. If the housing market slows it is likely that auctions will reduce slightly in popularity. However they have become a large part of the housing landscape over the past few years. So it will likely remain a popular form of sale.