Property Report: Are auctions the most successful way to sell?

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When it comes time to sell, vendors have a variety of ways to sell their house, such as tender, auction, asking price, negotiation, expression of interest and enquiries over. Which one will suit you will take into account a multitude of factors but we take a look at how different methods have fared relative to the sale price achieved.

When we look at our data on properties that have been listed for sale over the past year as well as all recorded sales, we can see that nationwide on average 31 per cent of sales were through asking price. This was the predominate method, compared to 18 per cent which were auctions, another 14 per cent that were through negotiation and 9 per cent that were enquiries over.

Across the country, the main method preferred in each area varies. For example, it is often talked about how auction is largely used throughout Auckland. This is confirmed by our data where Auckland far exceeded the national average for auctions, with old Auckland city seeing 56 per cent of sales by auction, the North Shore 45 per cent, Waitakere 30 per cent and Manukau 29 per cent. For old Auckland city and North Shore especially, this is largely at the expense of asking price, as this method only accounts for 13 per cent of sales in old Auckland city and 14 per cent for North Shore.

Other areas such as Rodney, Papakura and Franklin are all heavily dominated by asking prices, with 46 per cent, 54 per cent and 42 per cent respectively.

In comparison to other main cities, Auckland recorded a lot more auctions than the rest of the country. Hamilton was dominated heavily by asking price at 44 per cent, with only 19 per cent of sales going to auction. Christchurch had quite an even spread with negotiation the preferred sale method at 22 per cent. Both asking price and auction recorded 17 per cent of the sales and enquiries over accounting for 15 per cent. The only other area outside of Auckland that recorded more than 20 per cent of sales by auction is, surprisingly, Gisborne.

It is in Wellington however, where we see the biggest shift with enquiries over and tender the most popular sale methods at 31 per cent and 28 per cent respectively. Negotiation accounts for 21 per cent but auction and asking price are far behind with only 4 per cent of sales by asking price and 2 per cent by auction. Wellington City and Hutt City are also the only areas throughout the country where tender accounts for more than 10 per cent of the sales.

It is often said that auctions also fetch a better price than other methods. To test whether that's true, we have compared the actual sales price of each property to our E-Valuer's estimate of the market price at the time of sale. E-Valuer is an automated valuation model (AVM) which uses nearby recent comparable sales to estimate the market price of a property at a given point in time. While sales tend to fall relatively evenly either side of E-Valuer estimate, we looked to see whether different sales methods did better or worse than others.

Nationwide, half of sales are for less than the E-Valuer estimate at the time. Forty per cent of them were for less than 10 per cent above E-Valuer and 10 per cent were for more than 10 per cent over.

When we look at sales where the price was more than 10 per cent over the E-Valuer for that property, auctions were the most successful with 14 per cent exceeding that mark. Asking prices, tenders and negotiation in comparison achieved only a price 10 per cent above E-Valuer 9 per cent of the time, while enquiries over exceeded 10 per cent only 7 per cent of the time.

When focused on Auckland again, namely just old Auckland City, North Shore, Manukau and Waitakere, auction saw slightly more success. Auction sales were more than 10 per cent above E-Valuer 16 per cent of the time. In comparison, asking price and negotiation methods exceeded that level 10 per cent and 11 per cent of the time. There were also more auction sales where the price was 20 per cent above E-Valuer. This occurred for 3.8 per cent of auctions, but for only 2.5 per cent of negotiable sales, and not surprisingly for only 1.6 per cent of asking price sales.

In Christchurch, auctions have been the most successful method at fetching prices more than 10 per cent above E-Valuer, attaining this 20 per cent of the time. In Wellington though, where there are almost no auctions, tender is the most successful technique with 7 per cent of properties sold achieving a price over 10 per cent of the E-Valuer.

As a vendor, which sale method you choose can be affected by the local market and how comparable properties are faring when they sell. At the moment, auctions are working well in Auckland, and tenders in Wellington. Both methods tend to result in purchasers needing to put forward their best price, especially in a time of high demand. With the market in Auckland likely to remain strong for the foreseeable future, auctions are here to stay.

PropertyIQ is a market leading property information, data and analytics company. It owns and operates QV.co.nz, RPNZ and other property data solutions providing insight to a broad range of industry sectors including banks, insurance companies, real estate agents, valuers, government agencies, and everyday Kiwi consumers looking to buy or sell property.

* Jonno Ingerson is research director at PropertyIQ