Properties passing in at auction in Melbourne this winter tend to have a key feature in common, agents say: sellers’ price expectations are too high.

Other homes passing in may need renovation, may not be well presented or may fall into a more challenging price segment – although there are also inexplicable cases.

Three interest rate rises have contributed to weakness in Melbourne’s property market, alongside economic uncertainty and the federal budget’s changes to the tax treatment of investment properties. The share of auctions that sell under the hammer or prior has fallen.

Melbourne’s monthly auction clearance rate was as high as 73.9 per cent in September last year, but only 54.4 per cent in July. The rest of the properties were either passed in, withdrawn from auction or postponed.

This was a modest increase from 51.9 per cent in June, the lowest since September 2020. But the clearance rate remains below the 60 per cent threshold considered a balanced market, and indicates future price falls.

Vendors’ price hopes were a key reason why some homes taken to auction end up passing in, Jas Stephens Real Estate senior sales consultant and auctioneer George Alexander said.

“It comes down to the motivation of the seller and if they’re prepared to meet the market or not,” he said.

“Many sellers still have six-to-12-months-ago prices in their head. The market isn’t there, and they’re holding out for a price that may not exist.”

He said homes in need of renovation have been more likely to pass in too, as buyers seek homes that don’t need work.

BigginScott Richmond director and auctioneer Andrew Crotty agreed vendor expectations were key.

He was seeing some vendors who will sell, for example, a single-fronted home they bought in 2021 at a small loss, to upsize to a larger home at a bigger discount.

Other vendors were calculating how much they paid five years ago plus their stamp duty costs, and trying to recoup the total. “They’re not in tune with the market,” Crotty said.

He said it was important for a home to be well presented to secure a sale, but in some cases homes passed in for no clear reason. “Sometimes it’s just inexplicable,” he said.

Buyer’s agent Nicole Jacobs, managing director at Cohen Handler in Victoria, said buyers were looking, but hesitate to make decisions.

She said auction success comes down to price and motivation: many sellers now have bought, or are upsizing, and are realistic on their selling price as they got a good deal on their upsizer property.

“If they’ve bought, you’re in a very good position to secure the home at a good price,” Jacobs said.

Some homes pass in on a genuine bid, and the highest bidder is invited to negotiate with the seller at their reserve price. Some homes may not attract bidding, but attendees express interest after auction. Other homes were listed for private sale, perhaps with a revised price guide.

Alexander highlighted a recent sale at 33 Regent Street, Yarraville which attracted competition between two bidders at auction but did not reach its reserve price.

When it was passed in, the highest bidder negotiated but not as high as the reserve price. The home was instead sold to a third party who attended the auction but did not bid, for $2.04 million, higher than the top auction bid of $1,885,000.

Jellis Craig Inner North director and auctioneer Sam Rigopoulos agreed price expectations were an important factor but had also noticed a difference at different price points.

“There’s a lot of properties at the lower to middle part of the market that is performing really well and that seems to be really competitive at that entry to middle market,” he said.

Even if these homes passed in, they tended to sell within 72 hours, Rigopoulos said.

“At the upper end of the market, it’s been patchy for a long time,” he said, although tight stock levels had sparked some competition again recently.

Rigopoulos said upper-end homes that pass in are more likely to sit on the market, unless their price is adjusted.

He had a recent sale at 12 Park Street, Northcote, with a price guide of $1.55 million to $1.65 million.

Rigopoulos said two parties bid at auction, and it passed in the middle of the range.

Once the home was reopened, four new buyers inspected on the Sunday after the auction, two came for repeat inspections on Monday. It sold on Tuesday, and Rigopoulos would not comment on the price, but records show it was $1.64 million.

Agents encourage sellers to price and present their homes well and listen to agent feedback. They suggest being wary of agents who dangle high potential sale prices for low commissions to secure a listing.

Rigopoulos suggested sellers look at their home as if they were a buyer.

“Would I buy my home at this price? Is it the best available option at x amount of dollars in the marketplace?”