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Auction statistics questioned

17-07-2011 | Source | The Age
THE health of Melbourne's auction market could be far weaker than reported as criticisms are being raised about the accuracy of the Real Estate Institute of Victoria's sales reporting system.

The concerns come as figures compiled by The Sunday Age show home owners now face a less than one-in-three chance of selling at auction, compared to the better than 50/50 chance estimated by the industry body.

Louis Christopher, managing director of SQM Research, has labelled the REIV's clearance rate figures "inaccurate" and "misleading", alleging that the system used to collect the data is flawed.

"You've got a published auction clearance rate that is higher than is what the actual case on the ground," he said. "The industry wants to present auctions as a successful method of selling and the reality is that it is not as successful as they portray."

The REIV's long-running practice of classifying properties that pass in and sell through later negotiations as "sold at auction" is being criticised for allegedly overstating the strength of demand as conditions weaken.
"I think it's important that the clarification should be provided did it sell under the hammer or did it sell after the event?" Mr Christopher said, pointing out that a genuine sale by auction ensures a vendor's asking price has been met, at a minimum. "Anything that happens after the hammer, well, it's pot luck."

A Sunday Age survey of 226 auctions over the past year shows only 31 per cent were sold at auction in the 2011 June quarter - a fall from 62 per cent in the first quarter of the financial year.

In comparison, the REIV clearance rate is 52 per cent for the properties the group classifies as "sold at auction", which includes sales negotiated within 24 hours or, as some critics allege, even days after passing in.

REIV spokesman Robert Larocca said the group has used the same "transparent methodology" for the past seven years. "A home that is sold at auction is one where the vendor's price expectation has been met. Sometimes the owner has to reduce their expectation and sometimes it is exceeded, but in both circumstances it is sold."

REIV's system has also come under scrutiny because of a sharp rise in the number of results that are not being disclosed by agents since the end of the property boom in early 2010.

Last week, The Sunday Age revealed that more than a quarter of auction results published by the industry body in June were missing critical information such as the sale price, passed-in price or reserve. That includes 11 per cent of auction results that were not reported on the weekend they were staged, up from 7 per cent at the height of the boom.

Mr Christopher said the government should collect such statistics, but the Baillieu government has ruled out mandatory reporting, citing privacy concerns. Voluntary reporting systems are also used by analyst groups RP Data and Australian Property Monitors, owned by Fairfax, to produce clearance rate statistics.


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