Following an auction campaign, the phrase a vendor doesn't want to hear is "passed in". The terminology is used to describe a home that fails to meet the reserve price at auction, and therefore does not sell under the hammer.
At a ferocious auction, the atmosphere can be cut with a knife. Having multiple bidders who passionately want to buy the home is the dream scenario for vendors. Under the current market dynamics it is highly probable several Canberra vendors will be experiencing this type of auction atmosphere.
Canberra auction activity has been elevated this year. During the first ten months of 2017, just over 2700 homes went under the hammer, jumping by 17.9 per cent from the corresponding period in 2016. Apart from January, every month this year had a higher volume of auction activity compared to 2016.
A similar trend occurred last year but certainly not to the level of elevated auction activity recorded so far this year. Total auction numbers for 2016 were 1.2 per cent higher than the volume of auctions in 2015.
Buyers are likely to find that they have the luxury of having greater choice. However, despite the higher volume of scheduled auctions, clearance rates are maintaining the momentum that built in the auction market last year.
August produced the highest auction result this year, with a clearance rate of 73.7 per cent. Monthly clearance rates have been higher this year compared to last (excluding January and a marginally lower output in September).
January 2017 produced one of the lowest monthly results of the year at 50 per cent, vastly lower than the 75.8 per cent in January 2016. January tends to be a particularly quiet month for auction activity.
The benchmark for house price inflation is a 60 per cent clearance rate. Below 60 per cent suggests that going forward, the market could have lower demand, and price moderation could ensue.
If the lower performance of January is excluded, monthly clearance rates this year have ranged from 62.9 per cent to 73.7 per cent. It is suggestive that the level of demand is fuelling the output and the market will be driven by buyer activity moving forward.
Canberra's auction results continued to produce robust results throughout November. The first Saturday of the month notched a clearance rate of 67.4 per cent, the second Saturday produced a result of 70 per cent and the third scored 71.9 per cent.
Emotions will be running high if a vendor finds themselves part of the smaller proportion of homes that passes in, but all is not lost, as often the agent's negotiating skills can produce a sale before the day is out. In most states, the highest bidder exclusively holds the first negotiation right.
Of course, all vendors will remain hopeful of reaching the reserve price. From a seller's perspective, it is important to re-evaluate price expectations once a home passes in with no bidder making an offer.
An auction that lacks competitiveness suggests that price expectation is not meeting the market. Homes that are priced to the current setting will fare well at auction.