Victoria’s Auction Reserve Disclosure Plan May Drive Up Home Prices, Experts Warn

Key facts

• Labor's plan forces sellers to disclose reserve prices at least seven days before auction or fixed-date sale.
• Sellers must also pay for building and pest inspections under legislation proposed for 2027.
• Industry Insider Property Advocates director Andrew Date warns reserves may be set higher, increasing buyer costs.
• Current law allows sellers to change reserves before, during, or after an auction; new rules would lock them in.
• The laws are Australian-first and will be introduced if Labor retains government after the November state election.
• Sold prices must be disclosed once a sale becomes unconditional under the proposed changes.

A Gamble on Transparency

Victorian homebuyers could face higher prices under Labor’s proposed auction law overhaul, industry experts caution. The Allan government plans to introduce Australian-first legislation requiring sellers to publish reserve prices at least seven days before an auction or fixed-date sale. While intended to increase transparency, the move may backfire by encouraging sellers to set higher expectations, reducing competition and making homes harder to buy.

The Proposed Changes

The government is preparing to introduce laws that would also force sellers to organize and pay for building and pest inspections, with the legislation slated for 2027 if Labor retains power after the November state election. Additionally, sold prices must be disclosed once a sale becomes unconditional. These measures represent a significant shift in Victoria’s auction system, which currently allows sellers to adjust reserves flexibly.

Industry Concerns Over Competition

Industry Insider Property Advocates director and vendors advocate Andrew Date warned that buyers might think reserve disclosure helps them, but it could have the opposite effect. “Buyers will think that it’s good for them, but the reality is reserve prices might just be set a lot higher than what they would have been in the past,” Date said. “Therefore, they might have to pay more.” He cautioned that the rule could make Melbourne auctions messier and less flexible.

Loss of Flexibility for Sellers

Under current rules, sellers can change their reserve before an auction, during an auction, and after a property passes in. Date argued that forcing disclosure would lock in reserves, eliminating this flexibility. “If these rules come in and they have to disclose their auction reserve, then effectively they can’t change it,” he said. This rigidity could deter sellers from using public auctions, potentially shifting more sales to private negotiations.

Broader Market Context

The proposed changes come amid a cooling Melbourne housing market, with some analysts predicting a grim milestone of falling below $1 million median house prices. The reforms aim to address buyer frustration over hidden reserves and rising costs, but experts fear they may inadvertently exacerbate affordability issues. The November state election will determine whether Labor can proceed with the legislation.

What Comes Next

If Labor retains government, the legislation will be introduced in 2027, giving the industry time to adapt. However, the debate over transparency versus market efficiency is likely to intensify. Critics argue that without careful calibration, the laws could reduce auction participation and push sellers toward off-market sales, further clouding price discovery.

A Delicate Balance

The proposed reforms highlight the tension between consumer protection and market dynamics. While transparency is a laudable goal, the unintended consequences of higher reserves and reduced competition could leave buyers worse off. As Victoria moves toward a more regulated auction system, the outcome will be closely watched by other states considering similar measures.

The bottom line

• Labor’s plan to force reserve price disclosure a week before auction may lead sellers to set higher reserves, increasing buyer costs.
• The legislation, to be introduced in 2027 if Labor wins the November election, also requires sellers to pay for building and pest inspections.
• Industry experts warn the rule could reduce auction flexibility and competition, potentially driving sellers away from public auctions.
• Sold prices must be disclosed once unconditional, adding another layer of transparency but also potential market impact.
• The reforms are Australian-first and could influence housing policy in other states if implemented.