If anyone was a dedicated follower of auction clearance rates at present, and there are plenty of people who are, they would be thinking that the property market has imploded on itself. That’s because the number of auctions has fallen dramatically because of the coronavirus restrictions.
Of course, auctions are still taking place, but they’re online, which is a method that has been around for many years already.
Now there is no doubt that the number of vendors taking their property to auction has reduced, even though it remains a successful sales technique.
However, it’s important to understand that when it comes to current auction clearance rates, the numbers are not what they may at first glance seem. Indeed, the number of auctions that have been “withdrawn” appears unusually high at the moment due to the temporary ban on holding onsite auction gatherings.
However, in the auction clearance data, a withdrawn auction is counted as unsold, which is pull downing the clearance rate. And just because a property is withdrawn from auction, it doesn’t mean it hasn’t sold. What has likely happened is that the vendor has simply switched to a private treaty sale, with those numbers not counted in official datasets for some time yet.
What will auctions look like post-crisis?
While it appears we are on the cusp of relaxing some of the restrictions, it will probably be a while before large groups of people can congregate together at a concert, a bar or at an auction.
But this won’t sound the death knell for auctions, though.
You might be quite surprised to learn that many auctions only have a handful of registered bidders anyway. Sure, there might be the Smiths and Jones who live down the street there eager to learn the result, but they are not genuine bidders. Indeed, most of the people at auctions aren’t there to buy it that day at all. Some are foolishly chancing their arm that the property will pass in so they can attempt to buy it with less competition under private treaty conditions. While others are simply there doing market research because they’re keen on buying something similar around that location soonish. Other people were possibly just walking home from the coffee shop and stopped to watch the spectacle that is an auction.
As you can see, the vast majority of people at auctions aren’t there to buy. They were there to watch, which does sound a bit “off”, I must admit!
What this ultimately means though is that, say, auctions are allowed to revert to their traditional format, even if there is a maximum of 10 or 20 people, then the auction still has every chance of being as successful as did prior to the pandemic.
The people who need to be there, and that’s predominantly the bidders, but also the agency staff and the auctioneer will likely number well below any maximum person limit.
Sure, for a time, the rubberneckers will have to watch from afar, or online, but the purpose of an auction, which is to create competition between bidders, will be there front and centre.
And that’s why I believe auctions in the months ahead will be the same, but also perhaps slightly different for a time.