The real outcome of banning auctions
Banning street auctions sounds like it helps first home buyers — but does changing how homes are sold actually change what they cost?
The Victorian Greens want to ban street auctions and they have framed it as a win for first home buyers. The diagnosis is not entirely wrong. Auctions can create pressure, first home buyers do face enormous headwinds, and the housing market is genuinely broken for a lot of people. But the proposed cure does not treat the disease. It treats the thermometer.
Auctions serve agents more than vendors — and neither as much as the Greens claim
To understand why, it helps to understand who auctions actually serve. The Greens argue auctions are "designed to squeeze buyers for every extra dollar." That is half right. Auctions are designed to find the highest price, but the highest price accrues to the vendor, not the agent. And here is where the incentives become interesting: an agent's commission on a typical Melbourne property sale is roughly two per cent. On a $1.2 million home, that is $24,000. If the auction achieves $1.25 million instead, the agent earns another $1,000. A $50,000 swing in outcome for the vendor is worth almost nothing to the agent. The agent's real incentive is to close the deal and move on to the next one, not to extract the last dollar for the vendor.
Auctions serve agents because they force an outcome on a fixed day. A private treaty sale can drag on for weeks, fall through at the last moment, require repeated inspections, and still not settle. An auction gives the agent a clean exit. The vendor gets price discovery, which can work in their favour on a hot day and against them on a cold one. None of this is hidden or conspiratorial. It is just how the mechanism functions.
A $50,000 swing in outcome for the vendor is worth almost nothing to the agent. The agent's real incentive is to close the deal and move on to the next one, not to extract the last dollar for the vendor.
Changing the method does not change the maths
So when the Greens say the system is designed to drive prices higher, they are conflating correlation with mechanism. Prices in Melbourne have doubled over twenty years not because of auction clearance rates but because demand has grown and supply has not kept pace. Take auctions out of the equation entirely and that structural imbalance does not shift by a single dwelling. A determined buyer and a scarce property will find each other's price regardless of the method used to transact. The venue changes; the underlying economics do not.
The parallel with other demand-side interventions is instructive. First home buyer grants have been shown repeatedly to add to prices rather than reduce them when supply is constrained, because they give buyers more money to spend without creating more homes to buy. A ban on auctions is different in mechanism but similar in outcome: it adjusts the process around scarcity rather than addressing the scarcity. The same number of buyers chasing the same number of homes will, over time, reach similar prices through private treaty negotiation, expression of interest, or any other method you care to name.
The Greens acknowledge this, in the fine print. Their spokesperson notes that "banning street auctions won't solve the housing crisis on its own" and flags public housing and rent caps as companion policies. That is fair. But the framing of the auction ban as something that "levels the playing field for buyers" oversells what it actually does, and undersells the question of whether changing the transaction format meaningfully helps the people it is supposed to help.
Some parts of the proposal are worth keeping
There are legitimate arguments for some of the accompanying measures. Requiring reserve prices to be disclosed upfront would give buyers better information and reduce the weeks-of-wasted-effort problem the Greens correctly identify. Mandating that vendors pay for building and pest reports is a reasonable standardisation that prevents the current game where buyers commission multiple reports across properties they do not end up purchasing. These are genuine process improvements. They are not the same as affordability improvements.
The housing affordability problem in Australia is a supply problem. The research is not particularly ambiguous on this. More homes, built where people want to live, at densities that make the numbers work, is the long route out. Everything else, whether it is stamp duty relief, grant schemes, or auction bans, is moving furniture around a house that does not have enough rooms.
Buying a home in Melbourne is genuinely hard, and the Greens are not wrong to be angry about it. But a policy that changes how homes change hands, without changing how many homes there are to change hands, offers comfort without content. First home buyers deserve better than that.
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Frequently Asked Questions
Would banning auctions make houses cheaper in Melbourne?
No. Banning auctions changes the mechanism by which a property is sold, not the number of properties available. In a supply-constrained market, the same buyers competing for the same homes reach similar prices through private treaty or any other method.
Why do real estate agents prefer auctions?
Auctions force a definitive outcome on a fixed day, giving agents a clean exit from the sale. A private treaty sale can drag on for weeks, fall through at the last moment, and still not settle — all of which costs the agent time without adding meaningfully to their commission.
Do real estate agents benefit financially from higher auction prices?
Much less than most buyers assume. On a standard two per cent commission, a $50,000 higher sale price adds roughly $1,000 to an agent's fee. The agent's stronger incentive is to close deals quickly and move to the next listing, not to squeeze the last dollar from each auction.
What is actually driving housing unaffordability in Australia?
The core problem is a structural mismatch between housing demand and housing supply. Prices in Melbourne have roughly doubled over two decades not because of how homes are sold but because demand has grown faster than the number of homes built where people want to live.
Are there any good parts of the Greens' auction ban proposal?
Yes. Requiring reserve prices to be disclosed upfront and mandating that vendors — rather than individual buyers — pay for building and pest reports are genuine process improvements. They reduce wasted transaction costs without depending on supply reform to have an effect.