The Real Estate Institute of Victoria (REIV) has launched a fresh attack on the Victorian Government’s planned auction reforms, warning the mandatory disclosure of reserve prices could drive vendors away from auctions and into less transparent sale methods.
Under legislation introduced to Parliament, agents will be required to publish a property’s reserve price at least seven days before auction or fixed-date sale from 1 October. Auctions will not be permitted to proceed if the reserve has not been disclosed.
REIV chief executive officer, Toby Balazs, said the industry had spent months developing an alternative model designed to improve price transparency while preserving the flexibility that underpins Victoria’s auction system.
According to Mr Balazs, the government was represented on an industry strategic working group established to examine ways of improving the property market and reducing buyer frustration around pricing.
“We were probably three to four weeks away from releasing our full blueprint and, unbeknownst to us, the government decided to launch the idea of reserve price disclosure,” Mr Balazs said.
The REIV’s proposal would have required vendors to confirm three days before auction that their reserve price sat within the advertised price range; if the reserve moved outside that range, agents would have been required to adjust the advertised range accordingly.
Mr Balazs said the proposal addressed the core concern raised by buyers: properties being advertised within one range but only being placed on the market at a significantly higher figure.
“No one gets upset when a property is advertised at $900,000 to $990,000 and gets called on the market at $980,000. That’s how it should work,” he said.
“What people get frustrated with is when it’s advertised at $900,000 to $990,000 but doesn’t get called on the market until $1.1 million. That’s when they feel like they’ve been misled and that’s when they feel it’s underquoting.
“Our solution solved that problem because the vendor would have to declare that the reserve sits within the advertised range. If that changed, the advertised price range would also have to change.
“We thought that was fair and effective and workable because it gives vendors the right to manage their reserve price within a range, while also giving buyers confidence that the property will be called on the market within the range it has been advertised.”
The REIV argues the government’s model goes too far by requiring sellers to publicly disclose an exact reserve price a full week before auction day.
Mr Balazs said research commissioned by the REIV showed strong opposition to the government’s proposal among Victorians.
“We commissioned independent research and one of the questions was around reserve price disclosure and auctions,” he said.
“We had 94 per cent of Victorians surveyed say that if the auction rules as per the government’s proposal were to go ahead, they would essentially rethink or change their method of sale strategy.
“And we presented that to them; here’s the research, here’s what it says. You’ve got a whole lot of industry experts who are saying what your proposal has is not going to work and it’s going to move people away from auctions into less transparent sale methods.”
Despite that feedback, the government proceeded with the legislation.
Mr Balazs warned the reforms could ultimately reduce transparency rather than increase it if vendors begin abandoning auctions altogether.
“People will move to other sale methods that are less transparent,” he said.
“And what it’s actually going to do is create more frustration for buyers because the guide price, either through a different method of sale is likely to be less of an indication as to what the property will actually sell for.”
He also argued vendors may respond by setting higher reserve prices earlier in campaigns to protect themselves from accusations of underquoting.
“What vendors will likely do is raise their reserve price to mitigate risk so that they can’t be accused of underquoting,” he said.
The Victorian Government has defended the reforms as an Australian-first measure designed to stamp out underquoting and prevent buyers from spending time and money pursuing properties they have little chance of securing.
However, Mr Balazs maintains the industry supports stronger transparency measures and says the dispute is not about disclosure itself, but about the way the government has chosen to implement it.
“We’ve got a solution that is workable,” he said. “Despite all industry expertise and knowledge, despite independent research, everything to the contrary, they’ve said no and gone ahead with the need to declare the reserve price seven days out.”
Mr Balazs said the industry supports greater transparency in principle, but argued the government’s approach risks undermining confidence in the auction system.
“If the objective is to improve transparency and confidence in the market, there were better ways to achieve that outcome.”