New Vic auction laws numbers see state trail behind NSW

The Victorian government, led by Premier Ben Carroll, will introduce new auction reserve disclosure laws on October 1.

Victoria’s property market is set to hit a grim new milestone in the first full week to be subjected to state government’s new auction laws.

According to realestate.com.au, Victoria is slated for 707 auctions in the week from Monday, October 5, to Sunday, October 11, – compared to NSW’s 841 auction tally for the week.

As part of those numbers, Melbourne will host 686 auctions that week, and Sydney 718 auctions.

Just two bidders now competing at typical Melbourne auctions

New Victorian auction law will cost sellers, create legal underquoting

Victoria’s lower auction numbers for the week come a few days after October 1, when the new auction legislation, to be implemented by Premier Ben Carroll’s government, will require Victorian home sellers to disclose their reserve price seven days prior to any auction or set-date for a publicly advertised sale.

While sellers will get a two-week grace period, the government will be enforcing the new rules for all auction and set date sales from October 16.

However, with a four-week campaign typical, anyone listing a home for sale this week by either method will almost certainly have to comply with the new rules.

Experts have warned the changes will result in less transparency for buyers as the legislation’s rollout remains mired in confusion.

There’s also concern that the laws could oust Melbourne as Australia’s auction capital, with early forecasting the reputation hit will strike in week one.

Real Estate Institute of Victoria chief executive Toby Balazs says the new auction laws have created a lot of confusion.

Real Estate Institute of Victoria chief executive Toby Balazs said combined with factors such as the cost of living and widely expected interest rate rises, the laws were expected to result in subdued auction numbers throughout spring in Melbourne and surrounds.

“Let’s hope this is not the ongoing trend with regard to auction numbers in Victoria, but we know that the timing of these auction laws is problematic,” Mr Balazs said.

He said while the REIV and the industry was fully supportive of making auctions more transparent, there was “frustration” in the “clunky and challenging” way the legislation being launched.

Sydney is set to host more auctions than Melbourne in the week starting Monday, October 5. Picture: NewsWire/Damian Shaw.

“While the intent of the legislation is good, the execution of the new laws make it difficult and potentially more opaque, around what the actual price at which the property would be called on the market, for example,” he added.

Mr Balazs said trying to manage pre-auction offers without having to reset the requirement for the auction to be rescheduled a further seven days away, if the reserve changed, was one challenge faced by sellers, buyers and agents.

The REIV has been rolling out education sessions, training and information to help educate agents about the law changes, he added.

Real Estate Buyers Agents Association of Australia Victorian representative Matthew Scafidi says there will be “some teething issues” with the upcoming legislation.

Cohen Handler’s Victorian business director Zac Jacobs said the next three months would involve “a lot of flux”.

Mr Jacobs said while some people were approaching the new laws by putting a high reserve on a property, others were putting lower reserves based on an offer they’d already received for a home.

The buyer’ agent said the new Victorian laws would also likely result in a lot more pre-auction sales, especially if homeowners received a pre-auction offer which they did not accept – but would mean they raised their reserve.

“Then they have to put up the new reserve … and then they have a call off the auction on the Saturday and wait another seven days, that is quite complicated,” he noted.

Victorian sellers will only be able to change their reserve price if they reset the auction date for another seven days.

He said that the lower number of auctions scheduled for Melbourne in the first full week of the legislation’s operation could be a sign the state had lost its auction crown to Sydney, even if only temporarily.

“I think, with auction numbers at lower than they were last year, I think that’s obvious to anyone,” he said.

“Participation (in) auctions is very much lower this year, we used to see three, four, five bidders in our auctions, and now we’re like, you see one, maybe two.”

A vendor will still be able to change their mind on a sale, up until the contract is signed.

Real Estate Buyers Agents Association of Australia Victorian representative Matthew Scafidi said he was expecting auction numbers would soften in the short term, as home sellers and agents “feel out the new legislation”.

However, Mr Scafidi noted some of the lost auctions would be scenarios where the home should not have been going to auction anyway, and previously would have only been put up for that sale method by an agent wanting to let the market force a seller to see a price reality, rather than have a difficult conversation with them.

“So the number of auctions will drop a little … but the ones that won’t go to auction will be the ones where the vendor wants more than the home is worth – and they would have been the ones who would have passed in, in this market,” he said.

“So, I think potentially we can say we will have a better auction market than Sydney. There’s just going to be some teething issues with this as it comes in.”

Breaches of the new laws will come with a maximum penalty of 240 penalty units, which equates to fines of up to $48,842. Picture: Mitch Bear.

Noting that auctions were the most transparent way to buy a home for a lay person, Mr Scafidi said buyers would need to be very careful about understanding market value before pursuing homes will be overpriced

MORE: 5 per cent deposit scheme: Melb buyers lose as values plunge

Average Victorian buyers face lockout from 16 suburbs if RBA hikes

Former REIV president Adam Docking punched and robbed