A bunch of people waving their hands on a suburban street might sometimes feel like a chaotic and stressful way to land a property. Here's why economists believe property auctions are still an 'efficient' way to land a fair price.
abc.net.au/news/property-prices-auction-sales-australia-melbourne-sydney/102549152Packed into a suburban street, a puffer-jacketed crowd of people stamp their feet in the cold as they wait for the chance to bid on a home.Young couples chasing the dream of ownership, retirees hoping to downsize and property investors rehearsing their strategies.
While potential buyers might have a "private value" they've attached to the property based on research, at an open auction they are able to see the "common value", by observing the public bids of others."You think 'OK, this house must be really good because lots of bidders are interested and increasing the prices, so therefore I should have a higher price for this', and then you kind of re-evaluate your valuation," Professor Hafalir says.
Professor Hafalir has lived in both the United States and Australia and says the two countries have very different approaches to property auctions. University of Queensland economics professor Flavio Menezes says it's a similar story in the United Kingdom.
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