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The Impact of Auctions on Residential Sales Prices in New Zealand

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Abstract

The use of an auction to sell residential real estate in the United States is often associated with distressed sales such as foreclosure, bankruptcy or estate settlement. In other areas of the world, auctions are more commonly used and viewed as a viable, preferred method of selling a house. This article uses hedonic pricing methodology to compare the sale prices of houses in Christchurch, New Zealand sold at auction with those sold by private treaty. The results indicate that in some cases auctions can result in premium sale prices. In none of the cases studied did auctions result in lower prices than private-treaty sales.

Suggested Citation

  • Mark G. Dotzour & Everard Moorhead & Daniel T. Winkler, 1998. "The Impact of Auctions on Residential Sales Prices in New Zealand," Journal of Real Estate Research, American Real Estate Society, vol. 16(1), pages 57-72.
  • Handle: RePEc:jre:issued:v:16:n:1:1998:p:57-72
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    References listed on IDEAS

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    1. Ashenfelter, Orley, 1989. "How Auctions Work for Wine and Art," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 23-36, Summer.
    2. Larry DeBoer & James Conrad & Kevin T. McNamara, 1992. "Property Tax Auction Sales," Land Economics, University of Wisconsin Press, vol. 68(1), pages 72-82.
    3. Vanderporten, Bruce, 1992. "Timing of Bids at Pooled Real Estate Auctions," The Journal of Real Estate Finance and Economics, Springer, vol. 5(3), pages 255-267, September.
    4. G. Donald Jud & Terry G. Seaks, 1994. "Sample Selection Bias in Estimating Housing Sales Prices," Journal of Real Estate Research, American Real Estate Society, vol. 9(3), pages 289-298.
    5. Robert Wilson, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 511-518.
    6. Ashenfelter, Orley & Genesove, David, 1992. "Testing for Price Anomalies in Real-Estate Auctions," American Economic Review, American Economic Association, vol. 82(2), pages 501-505, May.
    7. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    8. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
    9. Preston McAfee, R. & McMillan, John, 1988. "Search mechanisms," Journal of Economic Theory, Elsevier, vol. 44(1), pages 99-123, February.
    10. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    11. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-1294, September.
    12. Milgrom, Paul, 1989. "Auctions and Bidding: A Primer," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 3-22, Summer.
    13. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
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    Cited by:

    1. Stevenson, Simon & Young, James & Gurdgiev, Constantin, 2010. "A comparison of the appraisal process for auction and private treaty residential sales," Journal of Housing Economics, Elsevier, vol. 19(2), pages 145-154, June.
    2. John D. Benjamin & G. Donald Jud & G. Stacy Sirmans, 2000. "Real Estate Brokerage and the Hosting Market: An Annotated Bibliography," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 217-278.
    3. Yuen Leng Chow & Isa E. Hafalir & Abdullah Yavas, 2015. "Auction versus Negotiated Sale: Evidence from Real Estate Sales," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 432-470, June.
    4. John D. Benjamin & G. Donald Jud & G. Stacy Sirmans, 2000. "What Do We Know About Real Estate Brokerage?," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 5-30.
    5. Alina Arefeva, 2016. "How Auctions Amplify House-Price Fluctuations," 2016 Meeting Papers 714, Society for Economic Dynamics.
    6. Simon Stevenson & James Young, 2015. "The Role of Undisclosed Reserves in English Open Outcry Auctions," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 375-402, June.
    7. Michael LaCour-Little & Arsenio Staer, 2016. "Earthquakes and Price Discovery in the Housing Market: Evidence from New Zealand," International Real Estate Review, Asian Real Estate Society, vol. 19(4), pages 493-513.
    8. Du, Hongyan & Ma, Yongkai & An, Yunbi, 2011. "The impact of land policy on the relation between housing and land prices: Evidence from China," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(1), pages 19-27, February.
    9. Yuen Leng Chow & Joseph T.L. Ooi, 2014. "First-Price Sealed-Bid Tender versus English Open Auction: Evidence from Land Auctions," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 42(2), pages 253-278, June.

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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