[+] To the Sound of Cannons: Site Auction Upsurge on Horizon

Solid auction volumes for sites across NSW and much of the rest of the eastern seaboard are creating favourable conditions for developers to build up pipelines despite residential auction numbers declining. And while it is early days yet for 2023, the signs are there it could well be a solid year for development sites on the block, bringing opportunity to those ready, willing and able to make the most of a more challenging economic period. Expressions-of-interest campaigns remain a common tactic to move on sites earmarked for development, but tightening monetary policy, rising inflation and interest rates coupled with higher construction costs and labour shortages have hit the market hard, with sale volumes of development sites cooling. Experts predict that the dampening of the property market is likely to fuel a renewed appetite for auctioning development sites, using auctions to squeeze the highest price out of a tightening market. CoreLogic predicts a weaker real estate auction market to continue in 2023 after its quarterly Auction Market Review showed 25,637 properties went under the hammer across the combined capitals with a clearance rate of 57.8 per cent in the December quarter. For 2022, CoreLogic figures show that 103,911 properties went under the hammer across the combined capitals, resulting in an annual clearance rate of 61.2 per cent. Time will provide more clarity around vendors’ willingness to go to auction and whether buyer confidence has picked up, CoreLogic research director Tim Lawless says. “We also anticipate at least one more rate hike which means we’re likely to see fewer properties go to auction as vendors may not be willing to test the market, opting to hold their property,” Lawless says. ▲ Colliers national director of investment services Miron Solomons. However, sellers favour auctions as a sales tool when the market has deteriorated or the agent is trying to move distressed assets, Colliers national director of investment services Miron Solomons says. While a strong appetite for development sites remains, there is a limited pipeline of stock suitable for development over the next few years, keeping prices elevated. Development sites with complicated planning or ownership structures often suit expression-of-interest campaigns, while auctions are a good strategy when the market dips, he says. “Banks and lenders will lean towards auctions because they feel it could be the quickest, most transparent form of transaction in this economic environment,” Solomons says. However, he acknowledges that it’s early in the year and that auction season for a new year usually begins in earnest from March, when the results of auctions in the first couple of months of the year are reported. “What I can tell you is that we’re seeing good levels of enquiry and good levels of engagement from developers, so I think we’re going to see quite positive results in that first tranche of auctions on development sites. “But otherwise, we’re still seeing good auction volumes across the nation. It is early in the year and the first true litmus test starts after Australia Day or thereabouts, so the true picture will emerge when we see the results from these auctions.” Despite more difficult trading conditions, there has been no shortage of developers keen to acquire sites to develop in any format, whether it has DA approval or not, he says. ▲ It’s a good time to be building the pipeline as a developer, according to Solomon. “It’s a good time to be building the pipeline as a developer. We’re still seeing good auction volumes across NSW and the rest of the Eastern seaboard,” Solomons says. The residential market, where some auctioneers report decent activity, may provide some clue as to the appetite for auctions across all sectors in the near future. While traditionally fewer auctions are held during the December and January period, solid activity was recorded in most capital cities, according to Apollo Auctions director Justin Nickerson. Apollo’s team of auctioneers report an optimistic start to the 2023 property year, underlined by the increasing numbers of people attending and bidding at auctions. These results are likely to also flow through to auctions of development sites. “This was especially the case in Brisbane, where the auction clearance rate rose to nearly 65 per cent–up from 58 per cent in November,” Nickerson says. Compared to November, the average number of registered bidders at auction increased from 2.8 to 3.3 while the average percentage of active bidders rose from 54 per cent to 57 per cent, according to the December 2022-January 2023 auction report. In Melbourne, auctioneer Andy Reed says that market conditions remain challenging but that there are signs of optimism. Fortune, the adage goes, favours the bold. It seems likely that the auction climate for sites with development potential will indeed test the mettle of the property sector’s bold in coming months. 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[+] To the Sound of Cannons: Site Auction Upsurge on Horizon

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