Eager to see if the housing market was actually cooling, Michael Andrew went along to a major property auction house in the big city. What he observed wasn’t encouraging.
“We’ll start the bidding at $1.3 million,” the auctioneer declared without a trace of humour.
The people in the crowd said nothing. They stayed silent for two, four, six seconds. “Do I have a bid for 1.3m?” she repeated, peering around into the crowd at all the blank faces; at the dozen or so real estate agents hovering around the room like gulls.
Again, silence – beautiful silence. It was the silence of forecasts and dreams, a silence so emphatic and sure of itself, that, for one satisfying moment, it seemed like New Zealand had finally woken up, come to its senses, and realised that the house on offer – a mediocre two bedroom brick and tile in Mt Eden – wasn’t worth $800,000, let alone $1.3m.
Could this be it? I wondered. Could the unwillingness to accept this ludicrous opening bid be a sign that the housing market is actually, finally cooling? It certainly seemed possible.
A few days earlier, a friend had told me that he had gone to an auction session where none of the reserve prices were met, and he had managed to buy a two bedroom home in Auckland for what you might have paid five years ago. It seemed a tohu – a tremendously positive portent that aligned with recent media reports of how demand was slowing down. It all provided a slither of hope that perhaps more decent homes would come back within the grasp of aspiring – and not particularly wealthy – homeowners. It seemed this very phenomenon was unfolding at the auction I was attending.
“Alright, well if there are no bidders we’ll pass on this and move onto the next,” said the auctioneer, raising her gavel. “First call, second call, third and final call…” Just before she brought the gavel down, the silence was broken as someone spoke up from the middle of the room, accepting the $1.3m bid – and all my hopes were shattered. What happened next was, for someone who’s never been to a property auction before, nothing short of madness.
It turns out the bid for $1.3million didn’t actually matter, because it was below the mystery reserve price. The sole bidder was clearly wary about making a higher bid, so the auctioneer sent over a big man in a suit to “have a chat”. The auction paused, Peruvian flute music played in the background.
After a few moments of muffled conversation with the bidder, the big man turned around and bellowed out “$1.4million” and disappeared into a side room, to put the offer to the unseen sellers. He re-emerged and walked back over to the bidder to coax an even higher bid out of them. After speaking with them for a few minutes, he turned around and boomed “$1.5 million!” before going back into the room to engage the sellers.
On and on it went, the bid increasing in $10,000 increments with the big man pulling the strings, until finally, with an offer of $1.55m, the auctioneer announced the sellers were happy and the house would sell. “Going for $1.55 million,” she called, gavel poised. “Going, going..”
Out of nowhere, another person’s hand shot up, raising the offer by $2,000. It was immediately met by $2,000 from the first bidder. And for the next 20 minutes, what started as a timid one-horse auction, turned into a manic bidding war, with the offer increasing by $1,000 and $2,000 increments every three seconds – the auctioneer goading them both on constantly.
The house finally sold to the second bidder for $1.65m. The gavel banged. The big man smiled. Everyone applauded.
The other auctions that day involved the same bizarre process; they would stall at early – but still outrageous – offers, below the unknown reserve price, and the big man in the suit would be deployed to convince them to improve their bids. What was he telling them, I wondered? Was it encouragement, threats, promises of suburban glory in a “tranquil double grammar zone”?
Whatever the big man did, he did it well. A villa in Mt Eden sold for $2.3m. A three bedroom in Manurewa with parking spaces for eight cars sold for $1.2m, and a cross-leased former state house in Sandringham sold for $1.1m.
In Massey, a weatherboard house whose bathroom “may or may not be consented” according to the auctioneer, sold for $915,000. Massey – my home suburb! I had spent most of my life trying to escape Massey, and now it turns out people were willing to pay nearly a million dollars to live there, with or without a toilet.
The only glimpse of sanity I observed that day was when an inner-city apartment with “water penetration issues” failed to attract any interest with a $150,000 opening bid – still ridiculously high for a leaky dwelling.
But by the end of the afternoon, I’d seen enough. The so-called “market cooling” was a fiction. At least it was in this auction house. From the auctioneer’s cynical dismissal of low bids, to the big man’s arm-twisting, to the other auction house staff on their phones shouting out offers from mystery bidders, the whole thing seemed designed to make the house buying process as hot and as feverish and as inflated as possible.
Of course, many would argue that’s the game; you don’t have to play if you don’t want to – or can’t afford to. And while that’s true, the game doesn’t seem fair when the weight of an entire industry is clearly supporting the seller, and whipping desperate buyers into a frenzy.
As I sat there, watching that bizarre game play out in real time at ground zero of the housing crisis, I started to see what the ones who couldn’t play were truly up against. Any lingering hope I had that the housing market would return to sanity was going… going…