With Peyman Khezr. Published in the Herald Sun, 27 November 2025
The Allan government’s proposed changes to house auctions won’t make things easier for home buyers. In fact, they are likely to make things worse, pushing sales into opaque private markets rather than public auctions.
The plan involves requiring sellers to publish a reserve price seven days before the auction. On the surface, this sounds like a victory for transparency. No more guessing games. No more “price guides” with a tenuous resemblance to the actual reserve price.
But it is driven by a very serious misunderstanding of why auctions exist in the first place.
The market for houses is not like the market for groceries or cars. Every property is unique and the value of a unique asset is inherently uncertain. It is hard to estimate what exactly a house is worth until you put it to auction. Auctions and buyer advocates will tell you that they are regularly surprised by how a house fares at auction.
That’s because an auction is itself the mechanism to determine what the house is worth. We discover the value of a house during the auction, not before it. It follows the seller (at least) the depth of demand on the day. It allows buyers to reveal what they are actually willing to pay.
By forcing sellers to commit to a reserve price well before the hammer falls, the government is asking vendors to predict the demand for the house on the day of the auction. This imposes a significant risk for sellers — a risk that they are going to have to compensate for.
Consider the two scenarios that will play out under these new rules.
In the first scenario, the seller, terrified of setting their primary asset for less than it’s worth, over-estimates the value of their house and sets the reserve too high. So the auction passes in and the property sits on the market.
In this scenario, the “honesty” of the new regime helps nobody. This is costly for the seller, who has wasted thousands on a marketing campaign but it’s also pretty unsatisfactory for the buyer, who spent all their energy and enthusiasm on what turned out to be a non-event.
In the second scenario, the seller underestimates the value. They set a reserve that looks attractive. But because the property now appears competitive, the market takes off. The bidding soars well past that reserve.
This is a better scenario for the seller but hardly solves the problem of buyer frustration. In fact, it replicates the exact feeling of underquoting that the policy is designed to stamp out.
We are going to end up with a crowd of disappointed buyers who thought they had a chance at the reserve price, only to be blown out of the water by market reality. The disappointment will remain, but it will now come with the government’s seal of approval.
There is a reason it is hard to find international examples where sellers are forced to publicly announce a reserve price in this manner. Other jurisdictions understand that mandating certainty in an uncertain market is a fool’s errand.
If you make auctions economically risky for vendors, they will simply stop using them.
We could well see a mass exodus from the public auction system toward private negotiations. If sellers cannot test the market openly without locking themselves into a number, they will test it privately. There will move into “expressions of interest” or private sales.
This would be a disaster for transparency. The public auction, for all its faults, is the most transparent way to sell a property.
Buyers can see their competition. They can see the bids.
By contrast, private negotiations are opaque. They happen behind closed doors. Private negotiations are far more prone to manipulation than a street auction.
By fiddling with auction rules, the government risks driving the market into the shadows, where information asymmetry is even worse.
Ultimately, tinkering with auction rules misses the broader point. The reason underquoting and auction anxiety are such potent political issues is not because the rules of the game are unfair, but because the stakes are terrifyingly high. That anxiety stems from Victoria’s incredibly high house prices, not the specifics of the auction process.
The emotional toll of the property search is real.
But legislating for pre-auction honesty by forcing vendors to guess the price of their home won’t move prices, and it won’t lower stress. It will just change the shape of the disappointment.