Property auctions have been the rage these days, especially since the COVID-19 pandemic has disrupted the real estate market and the industry has turned to this as a way to ensure market continuity.
In Australia, the real estate industry has remained strong despite the disruptions and, in fact, has surprisingly brought about strong demand for several property types and many have turned to remote transactions in closing deals.
State of Australia’s real estate industry
Currently, the real estate market has gone through some dramatic and significant changes over the last three years and here are some of the key market trends that have been observed.
Increase in property prices
Despite the economic uncertainty brought about by the pandemic, property prices in Australia have remained strong, and in many cases, have continued to rise.
Real estate industry research firm CoreLogic found that property prices across Australia increased by 16.1% in the year to June 2021.
Increased demand
In another report, the Real Estate Institute of Australia noted that demand for property in regional areas increased by 17.2% in the year to December 2020, compared to a 1.6% increase in metropolitan areas.
Low-interest rates and government stimulus measures have fueled increased demand for property in Australia, particularly in regional areas.
Remote or online transactions
As expected, the pandemic has accelerated the trend towards remote and online transactions in the real estate industry.
Many buyers and sellers are now using virtual tours, online auctions, and affix digital signatures to complete property transactions without having to meet the other party physically.
Shift in priorities
Many people had to reassess their living arrangements, with many seeking larger homes, outdoor spaces, and homes in regional areas, mostly for reasons of having to stay at home for extended periods.
While this was a necessity during the massive lockdowns, the trend has caught on and has been in popular use by many- if not most- in the industry until today.
This shift in personal and business priorities has increased the demand for certain types of properties, especially for houses with home offices and outdoor spaces.
Changing rental market movements
The rental market in Australia has been impacted by the pandemic, with some areas experiencing increased vacancies and decreased rental prices.
However, other places, particularly regional areas, have seen increased demand for rental properties and a rise in rental rates.
The property auction market
Several trends and patterns have emerged over the last three years in Australia and one that has seen a lot of these is the property auction market.
Now, let’s try and focus on the emerging trends that are dominating the real estate market in recent years.
The growing market for property auctions
Property auctions have become increasingly popular in Australia over the past decade.
According to CoreLogic, the number of properties sold at auction in Australia increased from 42,428 in 2011 to 103,272 in 2020, representing a growth rate of 143%.
The rise of online auctions
As mentioned before, online auctions have become more common in Australia.
One study noted that the number of online auctions in Sydney increased from 14% in March 2020 to 75% in August 2021.
Online auctions have also become more common in other major Australian cities such as Melbourne, Brisbane, and Perth.
The emergence of conditional auctions
Another emerging trend in Australia is the use of conditional auctions, which are done where the seller sets conditions that the buyer must meet before the sale is finalised.
For example, the seller may require the buyer to obtain finance approval or complete a building inspection before the sale is completed.
According to an industry report, conditional auctions have become more common in the Australian market, particularly in cities such as Melbourne and Sydney.
The popularity of pre-auction offers
Pre-auction offers are becoming more common in Australia recently, particularly in competitive markets.
This is where the buyer makes an offer to the seller before the auction takes place, in an attempt to secure the property before other potential buyers have a chance to bid.
Surveys have shown that pre-auction offers have become more common in Sydney and Melbourne, where competition for properties is high.
The off-market auctions
A study found that off-market auctions are becoming more common in Australia recently years, particularly in the luxury property market.
This is another emerging trend in Australia, where sellers do not publicly advertise the property for sale, and potential buyers are invited to bid privately.
What’s common among these trends mentioned above is that market behaviours leaning toward these emerging trends are the factors that encourage convenience and ease of doing business- which is something that the market has been seeing in recent years.
What it means for home buyers and investors
While the trends are seen gravitating towards streamlining the real estate transaction process, especially in the property auction market, it is still crucial for bidders to be aware of warning signs that could adversely affect their real estate journey outcomes.
Without proper knowledge and preparation, buyers can end up making costly mistakes and regret their decision in the long run.
The excitement of a property auction can sometimes cloud a buyer’s judgment and lead them to overlook important factors that could affect their investment.
Being aware of warning signs can help buyers make informed decisions and avoid common pitfalls.
Warning signs to beware
To ensure a successful purchase at a property auction, here are some critical warning signs to look out for the following;
Too good to be true reserve price
The reserve price is the minimum amount that the seller is willing to accept for the property and if the reserve price seems too high, it could be a warning sign that the property is overpriced or there may be undisclosed issues with the property.
Doing your research is critical to ensure having a clear understanding of the market value among similar properties in the area to avoid overpaying.
Limited or restricted access for inspections
Inspecting a property is a crucial part of the buying process and should never be understated, especially if you are seriously considering to bid on a property.
When you notice the seller limits access for inspections, it could be a sign that they are hiding something or there are underlying issues with the property.
A thorough inspection of the property is crucial before making an offer to avoid unexpected surprises.
Unfavourable contract terms
It is crucial to review the contract terms carefully before bidding on a property.
Unfavourable contract terms such as clauses or fine print that limits your ability to back out of the sale, require payment for repairs or renovations, or impose penalties for late payments.
You may negotiate any unfavourable contract terms or point out the questionable clauses before signing the agreement.
A highly-competitive bidding war
While a bidding war can be an indicator of the demand for the property auctioned and drive up the price, making it more difficult for buyers to secure a good deal can be a sign that you could end up paying way too much from what you initially planned.
Always remember to focus on your budget and stick to it, even in the heat of the moment. Avoid getting caught up in the excitement of the auction and overbidding.
Unclear title or legal issues
You’d surely want to avoid getting into a legal tussle or dispute with a sale, so it is critical that you conduct a title search and ensure that there are no legal issues or disputes related to the property.
Properties with unresolved legal issues can cause a delay in the settlement process or even result in the sale falling through.
Make sure to do your due diligence and consult with a real estate agent and legal expert, if necessary.
Taking part in a property auction can be an exciting and rewarding experience, but it’s important to be aware of the potential warning signs that can indicate problems or risks.
By doing your research, inspecting the property thoroughly, reviewing the contract terms, setting a budget, and ensuring there are no legal issues, you can increase your chances of making a successful purchase and ensure a memorable and worthwhile real estate journey.