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How Melbourne’s new auction rules are changing the game for property investors
Victoria’s new reserve-price disclosure rules are reshaping Melbourne’s auction market, with investors facing shifts in buyer competition, vendor behaviour and how they assess property value.
Melbourne’s new auction rules will give property investors greater visibility into sellers’ price expectations, but a sharp drop in auction volumes suggests the market may take time to adjust.
The first weekend under Victoria’s mandatory reserve-price disclosure requirements delivered a preliminary auction clearance rate of 56.2 per cent, up from 54.8 per cent the previous week.
Despite the slight clearance rate increase, auction volumes fell from 703 to 500, leaving experts questioning whether the rules will change buyer competition or simply alter how vendors sell.
Cotality economist Annabelle Mezieres said the stronger result did not necessarily signal improving demand, with Melbourne’s clearance rate still 10.2 percentage points below the same week last year.
“A higher success rate among this group of auction properties does not by itself show that buyer demand has improved, despite buyers having greater clarity around price expectations,” Mezieres said.
Under the new rules, vendors must publish their reserve price at least seven days before an auction and disclose the final sale price within seven days.
The legal requirement aimed to give buyers more transparency, ultimately helping investors better assess a property before committing to inspections and legal checks.
Will reserve disclosure change buyer competition?
With vendors unable to lower their reserves without triggering another seven-day delay, setting the right price became more critical in a market where buyer interest was already fragile.
Barry Plant chief auctioneer James Hatzimoisis said the seven-day rule risked leaving vendors unable to respond to late feedback without postponing their sale.
He said the restriction could put buyers off before they even inspected a property.
“We’re hearing some buyers are saying, ‘Well, that reserve is too high. I’m not even going to come along to that auction,” Hatzimoisis told SPI.
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He said agents traditionally used inspection feedback in the final days of a campaign, including midweek open homes, to help vendors judge whether their price expectations matched the market.
“If vendors want to decrease their reserve based on market feedback, I can’t see why they’d have to wait another seven days again.”
Hatzimoisis said that giving vendors more flexibility to lower their reserves could bring price expectations closer to buyers’ offers, reduce the number of properties passed in and help keep transactions moving while confidence remained weak.
However, Price Buyers Agents director Glenn Price said that publishing the reserve could filter out buyers unwilling to meet the seller’s expectations and attract more serious bidders.
“If buyers know the number a week out, lowballers stay home, and the people who turn up are serious bidders,” Price told SPI.
Experts said the published reserve offered a clearer view of the seller’s minimum expectations, but it was neither an independent valuation nor a ceiling on the final price, with comparable sales remaining essential to judging whether a property represented fair value.
Could vendors move away from auctions?
The disclosure requirements could also influence how properties are sold, with Hatzimoisis expecting private treaty sales to become more common in the short term as vendors adjust to the legislation.
“We may see more private sales in the short term, but I think that the process or the system, the auction system, will still be strong once everybody understands all this new legislation,” he said.
Mezieres said some vendors may be holding back from entering the market until they better understand the changes.
“Some campaigns may have been brought forward to finish under the old rules, and others postponed to meet the new timeline,” Mezieres said.
“The dip in auction activity may suggest that some potential vendors are waiting for a clear picture around the regulatory changes before entering the market.”
What investors should watch next?
With 489 auctions scheduled across Melbourne for the week ending 25 October, Cotality said the coming weeks should reveal whether activity recovers as vendors and agents adapt to the new requirements.
Mezieres said investors should track preliminary and final clearance rates, along with the share of auctions withdrawn or passed in.
As more sale prices are disclosed, she said that comparing results with published reserves could also help investors assess vendor expectations and market value.
“Over time, we could expect to see that the sold-price disclosure will also give buyers a larger public record of comparable sales, hence more transparency in Victoria’s auction market,” Mezieres said.
Similarly, Hatzimoisis said the market will have a subdued run through to Christmas, with falling prices, longer days on market and interest rates and government policy continuing to weigh on confidence.
“We’re not seeing increases, we’re seeing it shift downwards,” Hatzimoisis said.
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