Talking property: Fierce competition between buyers is the real reason for amazing auction prices, says Alan Cooke

The auction system in Ireland has served both sellers and buyers well for decades - sellers because it offers certainty and the possibility of a bonus price, buyers because it is the most transparent of sale methods. The system was without controversy until relatively recently.

Some would have us believe that the Celtic Tiger market made rogues of those auctioneers who served the public well for decades. How valid is that view?

Media coverage of the Report of the Review Group on Auctioneering demonstrated little or no knowledge of the report's actual contents.

The profession actually emerged well from an exhaustive, consumer-led examination of many practice issues, which found that auctioneers operate as they do because most of their auctions are constrained by the Law of Contract and the Law of Agency as they exist.

In terms of auction sales, the auctioneer assesses value and the seller sets the reserve, but only buyers, currently in fierce competition, determine the price achieved. In order to produce the price predictability some seek, it would be necessary for the intentions and resources of every bidder to be known in advance. Were this possible, we could end the auction system.

We are currently in a market where a small number of sellers, including local authorities, in counties like Meath, Mayo and Kerry, are achieving prices that exceed their expectations by about 100 per cent. Many auctions proceed well beyond the property being declared "on the market", the reserve having been passed, and in parts of our cities, where scarcity and a property's uniqueness are amongst major driving forces affecting the property market as a whole, some auction prices have been astonishing.

In last week's Talking Property, three sales were selected to illustrate anomalies with advised minimum values (AMVs). Another sale, where a disclosed reserve resulted in a sale price 14 per cent over the reserve, was described as producing a price "within a reasonable distance" of the reserve compared to the 33 per cent, 46 per cent and 47 per cent excesses in the AMV sales. The clear inference was that disclosed reserves produce more accurate pricing than AMVs. But do they, or are they subject to the same market vagaries as AMVs?

While they remain unusual, there have been five public auctions with pre-disclosed reserves in the first few weeks of the new regime. In three of these five, prices exceeded the disclosed reserve by 54 per cent, 42 per cent and 47 per cent respectively, with AMV/achieved prices of €175,000/€270,000, €270,000/€385,000 and €850,000/€1,250,000.

Those percentage excesses are very similar to many of the sales where auction prices have exceeded AMVs, yet no one suggests that auctioneers or sellers using disclosed reserves set out to undersell the properties or to mislead the public.

• Alan Cooke is chief executive of the Irish Auctioneers & Valuers Institute