October 2020

This is the 27th in a series of articles summarising monthly news and happenings in Sydney real estate, and more broadly.

Record breaking auctions

This month records have tumbled with some incredible results announced by Sotherby’s managing director Michael Pallier. Domain reports Pallier had an amazing month breaking his own record by selling at auction the most expensive house on record in Australia for $24.6 million – for a staggering $10.6 million over reserve. The 5 bedroom house on Vaucluse Road was previously owned by Akihiko Terada, and was bought by a young couple who had never bid at an auction before.

Pallier’s previous personal record was in 2009 selling Le Manoir in Bellevue Hill to Lachlan Murdoch for $23 million.

Whilst an unbelievable achievement for all involved, it shouldn’t overshadow Pallier’s other remarkable result for the month, as reported by realestate.com, of selling at auction ‘the worst house on the best street’ also in Vaucluse. This went under the hammer for $5.5 million, an (almost as) astounding $2 million over reserve especially considering it is semi-detached, and with no off street parking. It was described as a ‘doer upper’. Not exactly what you’d expect!

It looks like these sorts of better-than-expected results seem to be spreading throughout Sydney. For example Domain notes that Sydney house prices seem to be back on the rise, even if units appear somewhat weaker. The article reports that pockets of the city price jumps in excess of $100k, even though in the same article noted that Central Coast auctions are attracting a lot of interest amid the growing work from home movement.

In a separate article Domain also detailed the other regional areas where Sydneysiders are impacting rental pressure as they check out an area before buying.

The Nobel Prize for Economic Sciences

In other extraordinary auction related news, 2 auctioneers have won the Nobel Prize for Economic Sciences. Yes you read that right.

The Nobel Prize in Economic Sciences is not technically one of the original prizes endowed by Alfred Nobel in his will in 1895, but has been financed by Sweden’s central bank since 1968. Having said that, laureates are announced at the same ceremony as the former and it is referred to as a Nobel Prize by the administering Nobel Foundation. So, yes it is a Nobel Prize.

How did they win? to answer that, just need to get a little technical for a moment: At its most basic, an auction helps decide the value of a property when there is ambiguity about its worth. The thing is, that ‘value’ is often based on the perception and knowledge of the bidder, so different people with different levels of knowledge about a property would place different values in it (available funds notwithstanding etc).

Over and above the normal property auctions we know and love, different types of auctions have different types of rules, and can be designed in different ways. For example, a normal residential property auction pretty much anywhere in Australia is at the premises being sold (social distancing restrictions permitting), bidders may or may not be vetted depending on what State the auction is held in, and information about the property would usually be available on the day. That is one type of design. Another might be to submit a sealed bid without knowing what anyone else had bid. That wouldn’t be very likely for a property auction but it might work in a tendering process for example. Or what if you could adjust your bid 1 time only after hearing the bids of others?

The list of design options goes on, and Professors Robert Wilson and Paul Wilgrom have been at the forefront of auction design for decades, including a lot of research about all the points above. Congratulations to them both on a well deserved award!