It is no surprise that the Melbourne auction market is currently ultra-competitive.
Photo by Austin Distel on Unsplash
After all, it seems that property development Australia is on a steep upward trajectory year-on-year. Therefore, with some houses selling for more than $3 million in prime areas of the CBD, it is even more critical for buyers, particularly first-home owners, to be aware of current market conditions.
Next to the substantial increase in Melbourne house prices over the past decade, there has also been a rise in average auction clearance rates. That said, it would be worth paying close attention to three critical factors before jumping into the market to maximise your chances of winning.
1. The Number of Auctions
As a rule of thumb, buyers should ensure that they are up to date with which suburbs are experiencing higher rates of auctions. For example, there has been an increasingly high number of auctions around Caulfield North, Prahran, and Ivanhoe East in recent months. Some areas have seen 30% more auctions in the past 12 months compared to previous years, so buyers must be extra vigilant while hunting for their perfect property.
2. Number of Bids Made at the Auction
Upon arrival at an auction, aspiring bidders must determine how many people are planning to make bids (and keep in mind that a bidder can make multiple bids). The information is found on the real estate agent’s marketing material.
The number of bidders at an auction signals the intensity of the market, as it is a good indicator of whether many other buyers are competing for the property. If few bidders are present, this may not be the best time to bid, particularly if one is looking for a profit after just a few years.
3. Eligible Buyers
Another factor that potential bidders should consider before attending an auction is how many eligible bidders would take part in the sale. For example, if more than five bidders are expected, the chances of securing a property will be higher. In addition, it is worth knowing that bidders must register before auctions with most real estate agents – so if they have not done so already, buyers should complete this process as soon as possible.
4. Payment by Buyers
It is also worth noting that most auctions require a deposit on the day. With this in mind, prospective bidders need to know how far they are willing to go with their bids based on their financial situation. A good tip would be not to bid any more than 90% of the amount they would be willing to pay if the sales price exceeded the reserve.
In addition, it is also worth finding out how much buyers are prepared to go down on their offer price. Related information can be found in the real estate agents’ marketing material, or you may even ask an expert in property development in Australia.
Finally, if bidders are looking for a lender ahead of their auction, they should ensure that the loan has been submitted at least five business days before the sale. It is an important step that can have significant ramifications if buyers are short on time, so it’s worth checking beforehand to avoid any last-minute stress.
5. The Reserve Price
As many buyers are already aware, in most cases, auctions do not require that an offer price be set ahead of bidding. Instead, offers are made and bids raised until the property’s registered owner (the vendor) agrees to sell for a specific price or withdraws their property from sale.
It means bidders cannot determine what they will pay in advance and need to wait until the bids are made for them to know if they have won the auction.