Property Report: Mixed emotions in the auction room

You don’t need nerves of steel to bid at a house auction, but it sure helps. Bruce Morris spends the day in the Barfoot & Thompson auction rooms

Stuck in an auction room with a stack of strangers, ready to make a decision linked to years of debt - who wouldn't be nervous? Buying a house is one of the biggest decisions we make, and bidding for one at auction is often a blend of excitement and anxiety.

Even a bit of blind terror can get into the mix when heart starts to rule head. Graeme Hart and friends may find it undemanding but most of us would surely admit to an accelerated pulse rate as the auctioneer turns to a property which has filled our minds for weeks. And the young couple in the Barfoot & Thompson Auckland city auction rooms last month were no different.

As jittery world markets absorbed the morning news that Greece was heading for a referendum to test support for the huge bailout - shaving billions of dollars from investment portfolios around the globe - the two 30-somethings had more important things on their minds.

Their target was a 1970s two-bedroom, two-storey unit in a terraced block in Howe St, Freemans Bay, right on the fringe of the CBD... and, on top of their knowledge, the vendor was "highly motivated". They soon learned something to help ease their nerves. They were the only bidders.

For real estate agents and people taking their properties to auction, there is only one thing worse than one bidder - and that's no bidder. No problem for single buyers, though. The advantage is theirs. Still, keen buyer and sensible seller is an equation that can work.

There may be no chance of a decent auction premium for the seller, but the tension of the moment on the buyer and the risk of opening the door to potential conditional buyers and missing out can narrow the gap.

This day, neither party left the auction rooms ecstatic. But each would have been pleased enough. The young couple, looking every inch first-home buyers, started the bidding at $350,000 and soon found they were on their own.

Bit by bit, as agency representatives quietly talked to them about the vendor's expectations, the price was raised - to $360,000, then $390,000 and $400,000. More chat, more backwards and forwards and the price was shoved to $440,000, and then $455,000 and $465,000.

For a while, it seemed as far as the young couple wanted to go. But they found a little more in their budget, crawling their way to $468,000 and then $469,000 before finally winning the prize at $470,000.

It was no doubt more than they hoped to spend, but the seller - perhaps a useful poker player, bearing in mind the "highly motivated" status - came down to meet them and the market ruled. Who says an auction is pointless when only one party turns up to bid? People outside Auckland - and even in wider parts of the city - may look at the tidy 77sq m unit and ask: "They paid $470,000 for that - why?" Good question when the same money could buy four bedrooms, two bathrooms, double garage and a lump of land in respectable outer suburbs - and not far off the best house going in many provincial towns.

But it's the power of the central city and a walk to work, restaurants and entertainment that drives this part of the market and does so in big cities all over the world. The new owners are probably banking on location to give them decent capital gain over time, and no one can be certain where the price will go from here.

But the property's track record is impressive. It sold in April 2006 for $326,000, in December 2009 for $405,000 and in April this year for $445,000. Auckland City valuers can see the attraction that may be missing to others: in the latest rating revaluation process, the unit capital valuation was raised an astonishing 30 per cent to $490,000.

Elsewhere in the auction, the news generally wasn't brilliant for sellers - further confirmation that, despite the evidence of some excellent sale prices fuelled by a lack of stock, this Auckland market remains very patchy.

Unlike the boom times of the five years to the end of 2007, when all properties were drawing interest, Auckland is no single market now. It is a sea of separate markets and many quality listings are selling before reaching the auction room while other properties languish as buyers wait for owners to get real about price.

Of the 54 properties in the Barfoot & Thompson auction - dominated by homes in the west, central and eastern suburbs, with no North Shore or Manukau representation - 14 sold under the hammer, with deals negotiated on two others the same day.

It seemed that just seven of the homes which sold went for prices above pre-auction owner expectations. Of the 40 homes passed in - many of which may sell in due course to conditional buyers - 17 drew no bid or a single low bid, suggesting early sales at tantalising prices are unlikely for them at least.

Auction action

Some of the more interesting performances (showing, in the first case at least, why rating valuations should not be confused with registered valuations or quality real estate agency appraisals):
• 45 Pembroke Cres, Glendowie, which carries a 2011
CV of $650,000 and sold at $22,000 above reserve
for $812,000.
• 10 Kingsway, Epsom South (CV: $590,000):
sold $15,000 above reserve for $750,000.
• 1/28 Watling St, Epsom (CV: $610,000):
sold at $19,000 above reserve for $578,000.
• 61 Golf Rd, New Lynn (CV: $480,000):
sold at $10,000 above reserve for $540,000.
• 1/41 Rawhiti Rd, One Tree Hill (CV: $510,000):
sold at $20,000 above reserve for $520,000.