In Brief
- New research suggests failure at auction can burden a property for six months.
- Experts warn the housing market is "losing momentum" in Australia.
Australians who fail to sell their homes at auction could miss out on up to $10,000, according to new research.
A study by the University of New South Wales (UNSW) Business School found homes that aren't purchased at auction eventually sell for 1.3 per cent less than comparable properties sold via private treaty — which, based on the average home price in NSW and Victoria, is a loss of up to $10,000.
The research, published in the university's Review of Finance journal, set the premium for a successful auction at 0.7 per cent, between $2,000 and $2,500, compared to private treaty sales.
For those homeowners who prepared for the risk of auction failure, the monetary loss narrowed to 0.3 per cent.
The research analysed data from over 480,000 residential property transactions in NSW and Victoria, between January 2007 and December 2019.
Researchers studied properties that had been sold more than once and found the most common reason for auction failure was an inconsistency between what a seller would accept and what a buyer would pay.
Auctions are popular sale method, according to Domain's chief of research and economics Nicola Powell, who describes them as a "marketing campaign on steroids".
"People now embark on an auction campaign because they want to get that real sugar hit, they want their home to get exposed to as many buyers," she told SBS News.
But things can go stale quickly after a failed auction.
"The longer a home is on the market, the deeper the discount becomes over time," Powell said.
"Then if the home has been on the market for 90 days, and a buyer has been looking in the area, they become aware that the home is still lingering on the market," she said.
The stigma in selling
This is what UNSW Business School associate professor Kristle Cortés calls 'buyer's stigma' — one of two psychological mechanisms identified in the research.
"A failed auction is a very public signal. Even though the reasons for failure are often ambiguous, buyers may infer that there is 'something wrong with the property', creating stigma," Cortés said.
"At the same time, sellers may feel discouraged after a visible failure and be more willing to concede in subsequent negotiations.
"Both forces push prices down, even when the property itself has not changed."
Properties that failed multiple auctions sold for 1.8 per cent less than those that failed once, while those that attracted no bids at all received prices 1.7 per cent lower than single-failure cases.
Properties that failed auction in a high-demand market suffered large discounts because the surprise outcome further intensified buyer's stigma.
Cortés said the financial loss of a failed auction diminished for a property six months after the said auction.
"The fact that the discount fades suggests that stigma plays a key role," Cortés said.
"As time passes, new buyers enter the market who are less aware of the failed auction, and the negative perception gradually dissipates."
She said if discounts depended entirely on information about the property's quality, they wouldn't disappear in time.
"Auctions are not shaped only just by fundamentals, but also by psychology," Cortés said.
"The public nature of auctions means that perceptions, embarrassment, and stigma can influence prices in ways that standard economic models often overlook."
A symptom of a downward market
More and more homes are passing in at auction, according to Tim Lawless, executive research director at Cotality's Asia-Pacific research division.
For the last decade, the average clearance rate has been 66 per cent.
"We've been seeing a combined capital clearance rate holding below 60 per cent since early March," Lawless said.
"Last week was 52 per cent, it's the lowest clearance rate since December 2022."
He said it's a symptom of the housing market "slowing".
"I use that word really broadly, everywhere you look around the country, rates of growth are slowing down — it's losing momentum."
The market began trending downwards in November 2025. Lawless said affordability and serviceability challenges that hinder market participation are the leading causes.
He said the downward trend may be encouraged by inflation rate hikes, budget tax changes and "plummeting" consumer sentiment.
This could flip the market to the buyer's advantage.
"We're finally seeing some evidence that the market's moved from being a seller's market to a buyer's market," he said.
"When the market slows down, and when buyers are in the driver's seat, you're not going to find as much competitive bidding and adoption unless the price is really competitive."
With one in five Australian homes failing to sell at auction, Cortés said failure is a very real possibility that isn't properly prepared for.
"What surprised me most was how little attention is paid to the prospect of failure in the selling process," she said.
"There is a lot of attention on successful actions, especially those with bidding wars that sell for far above the reserve price."
"It is as if failure isn't an option."
She believes more Australians need to properly consider the risks and rewards of selling their property.
"Sellers should think carefully about their tolerance to risk, their time constraints, and the current market conditions," she said.
"The potential downside from failing can be larger than the upside from succeeding, especially in the short run."
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