Clearance rates have now entered their seventh week in a row with less than half of all properties going to auction come out the other side sold.

CoreLogic figures show only 46.8 per cent of homes sold at auction last week. Brisbane is doing the worst at 32.1 per cent, while Melbourne and Sydney were almost tied at 48.3 and 48.4 per cent respectively.

CoreLogic national auction market commentator Kevin Brogan said the difficulty in getting finance for many buyers was having major flow-on impacts at auctions, both for buyers and sellers.

“That impacts on the auction market because a property sold at auction sells at the fall at the hammer,” he said.

Brogan said the high numbers of houses going to auction, combined with the limits on budgets for bidders was “taking some of the bidding energy out of the market” and making the situation worse.

SELLERS EXPECT 2017 PRICES, BUYERS WANT 2019 PRICES

Melbourne University Business School economics associate professor Sven Felderman said the low clearance rates were a manifestation of the bigger problem gripping Australia’s housing market: a clash of expectations between sellers and buyers.

“The real problem in a soft market is that buyers adjust their expectations much faster than vendors,” Dr Sven Felderman said.

“Vendors have the number in mind that they got six months ago but they’re very reluctant to adjust that.”

He said sellers were slow to drop prices once they’d decided on a value for their property, while buyers were more than willing to adjust the price they’d pay downwards.

Prices are down 5.1 per cent in the combined capitals over the past 12 months. But prices don’t fall of their own accord, they do because vendors discount.

What’s adding to the momentum is swell of properties onto the market, with 9.8 per cent more houses listed for sale compared to 12 months ago. This is even more noted in Sydney and Melbourne, with 16.7 and 17.8 per cent more respectively.

All this is doing is adding to the as-yet-unsold, or passed-in, houses on the market and adding fuel to the fire that is vendor discounting, because at the moment it’s looking like if you don’t discount, you don’t sell.

Dr Felderman said that the auction system in Australia had been abused, as sellers were not forced to disclose a reserve, and that this pushed buyers to hold back their final bids and sellers to hold back the price they’d accept, leading to more houses passing in.

“By not using that proper auction format, we’re destroying the actual purpose of an auction,” he said.

“If we were using a rule that every vendor were to commit to a reserve prior to the auction commencing then we would have a more effective mechanism.”

He said without a change auctions simply became a fight for who gets to negotiate with the seller.

Mr Brogan said there was a culture of acceptance of auctions in Sydney and Melbourne, which in part was leading vendors to look at it as the way to sell. This worked well for many in the boom time, but the turning of the market is leading stock to stay stuck on the market.

“It’s fairly straightforward. If you’re in a market that’s increasing then the temptation to test the rising market to get the absolute maximum you can for your property is a really strong draw,” he said.

Propertyology buyers agent Simon Pressley said despite the recent noise around auctions, it was important to remember that up to 90 per cent of properties sold in Australia were not sold at auction.

“The conditions of buying under auction leave a lot of buyers nervous,” he said.

“If you’re the last hand in the air when the gavel hits the plate you’ve got that property unconditional, you then cross your fingers that the valuation comes back to your bank’s satisfaction.”

Mr Pressley said auctions best suited sellers in a rising market, but that when they headed south it could result in unattended sales, and the stigma of being passed in.

“I’m not saying auctions should never be used, I’m saying the broader perception about how much auctions are used is grossly out of whack,” he said.