Switching to open bidding in a hot real estate market could further exacerbate price escalation, says one recent report
The Liberal government’s electoral promise to ban blind bidding in residential real estate sales has mobilized the real estate industry and consumer groups to argue for and against the practice. Given the lack of research and insights on blind bidding in Canada, the SPI report is the first step towards informed deliberations as the government probes ways to reform the industry.
The report points out that in some jurisdictions where open bidding or open negotiations are permitted, such as Australia, New Zealand and Sweden, housing prices have escalated faster than in Canada. Based on recent changes in prices, the report argues that “it is hard to conclude that blind bidding is associated with higher residential real-estate prices.
But given we’re awash in data and real time information flow, should we trust the finding from Singapore that buyers are better off being ignorant? There are limitations on how far one can stretch any lessons drawn from the study, since it was based on the sale of just 145 land parcels, of which only 20 were sold in open auctions.
Is this a strike against open auctions? Not really. The issue at hand is underpricing. The auctioned properties were massively underpriced, such that the average list price for auctioned dwellings was 27.7 per cent lower than that of the privately negotiated sales.
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