Here's why Chinese buyers are winning at Australian auctions

Chinese buyers have been described as 'among the most sophisticated' bidders at Australian property auctions. Photo / Getty Images

News.com.au reporter Frank Chung has uncovered six auction tips that Chinese buyers in Australia appear to be getting right.

Chinese buyers in Australia are increasingly beating other bidders to the punch at auctions - and it's not just because they have more cash to throw around, according to one leading auctioneer.

James Pratt, director of auctions for Raine & Horne and J Pratt Realty, says the skill set of Chinese buyers at auctions is "absolutely through the roof" compared with a few years ago.

"Four or five years ago there were always buyers' agents or interpreters there with them," he said. "Now I'm seeing really high-performance bidding from Chinese whose second language is English."

That means coming with a clear set of tactics rather than just "hoping for the best", he said.

He cites a Chinese buyer who recently outperformed five other registered parties at an auction for a luxury CBD property by immediately opening the bidding, bidding in uneven increments, and then only rejoining the bidding right before the fall of the hammer.

"That shows to me someone who's got a game plan," he said.

Gavin Norris, chief executive of Chinese international property website Juwai.com, said Chinese buyers were frequently nervous about auctions up until a few years ago.

"Australia is one of the countries where Chinese buyers are most likely to encounter an auction - it's much less likely in the UK, the US or Canada," he said.

"They often had someone with them who would interpret the proceedings for them. Their uncertainty often slowed the auction down so they could keep track of what was happening."

Today, he said, Chinese buyers are among the most sophisticated at auctions.

"It's not because they overpay," he said. "It's because, like every smart buyer, they fight for every dollar.

Auction tips:

According to Mr Pratt, these are six of the most effective auction techniques being used by Australian investors today:

1. "If your English is not perfect, it's okay to ask the agent to write down the price as the auctioneer calls the bid. This gives you extra time to gather your thoughts and keep your emotions under control while taking better control of the auction."

2. "Use your poker face and be confident. Couples buying the next family home tend to show a lot more emotion than investors, who are less emotionally attached. If you reveal too much, other buyers will find it easier to bid against you and the auctioneer will read your body language."

3. "Start with a bang. When the auctioneer calls for an opening bid, rather than sitting back and waiting for someone else, start the bidding with a knock out bid. This may take out some of your competition and also establishes you as the leader of the pack."

4. "Don't be afraid to slow the auction down or to bid in uneven increments. At auctions, buyers used to be too nervous to challenge the pace or increment that bids are going in, but not anymore. If the auctioneer is doing $25,000 rises, try offering an increment of $21,500."

5. "If the property is going to pass in, be sure to make the last, highest bid. That ensures by courtesy that you have the first right to negotiate with the seller after the event."

6. "Keep your emotions under control. Set a price above which you will not go, and walk away if the bidding goes too high."

"If a Chinese buyer doesn't feel comfortable at an auction, they very commonly ask a friend or family member who is more experienced to stand in for them. That tends to produce some individuals who are highly skilled and very cool and comfortable under pressure."

Pratt, who is averaging a particularly slow 20 auctions per week at the moment, said there was still a lot of strong interest from Chinese across the board despite recent attempts to slow out-of-control house price growth.

In a research note this week, ANZ said tighter borrowing criteria and increased taxes on foreign buyers "could see reduced demand from foreign buyers, although as yet there is little hard evidence of this".

There is always the opportunity to improve your auction skills by attending more auctions, talking to the auctioneer or agent, deciding on tactics.

New South Wales in Australia recently introduced a 4 per cent stamp duty surcharge and a 0.75 per cent land tax surcharge on foreign buyers. The state of Victoria has increased its stamp duty for foreign buyers from 3 per cent to 7 per cent, while Queensland has introduced a 3 per cent stamp duty.

"We continue to expect that demand for housing will ease from here, driven by tighter lending standards, especially for property developers and foreign buyers," ANZ wrote.

"Easing demand is expected to see price growth slow from hereon. From a peak of 12.8 per cent year-on-year in September 2015 and 8.1 per cent currently, we expect national house prices to rise by 6.4 per cent and 1.7 per cent in 2016 and 2017 respectively."

In Sydney, house prices have increased by as much as 50 per cent over the past three years.

Photo / Michael Craig

Pratt said despite concerns that foreign buyers were contributing to housing affordability woes by outbidding locals, the auction was "still the fairest method of selling a home".

"There is always the opportunity to improve your auction skills by attending more auctions, talking to the auctioneer or agent, deciding on tactics," he said.

"Sometimes a really hot property early on in the market campaign may only have one or two registered bidders by the time it comes around."

It comes as falling auction numbers and strong buyer demand lifted clearance rates to a 14-month high and pushed housing prices higher.

In the week to Sunday, 77.8 per cent of auctions in Australia's mainland state capitals ended with a sale, the highest clearance rate since June 2015, according to figures from Australian property analytics firm CoreLogic.

Australia is one of the countries where Chinese buyers are most likely to encounter an auction - it's much less likely in the UK, the US or Canada.

And three of the five mainland capital cities recorded price rises enough to outweigh a small fall in Adelaide and a more than one per cent drop in Perth, and to lift the five-city average by 0.1 per cent.

In Australia there were 1444 auctions listed for auction last week, down by 32 per cent from the corresponding week of 2015, when the clearance rate was 74.6 per cent.

"The strong trend in auction results over recent months has been achieved on falling auction volumes, suggesting the buyer demand is outweighing the supply of homes being taken to auction," CoreLogic said.

The high national average for auction clearance rates was driven by the two major markets.

"Sydney's preliminary clearance rate broke the 80 per cent mark this week, with 81.6 per cent of auction results collected so far being positive, while Melbourne was virtually at an 80 per cent clearance rate (79.9 per cent) based on the early results," CoreLogic said.

The small rise in average prices in the past week meant annual growth in the five-city average slowed to 5.9 per cent, the figures showed. That was the first time under six per cent for nearly three years and well below the annual rate of 11.3 per cent recorded this time last year.