Under the hammer: auction sales booming
24 March 2023
By Jeremy Greer
Investors are rushing to buy at auction. What’s behind this, and what does it mean for the housing market?
Recent figures from Essential Information Group, who monitor property auction sales across the UK, report that the first two months of 2023 saw an increase in the number of auction lots.
They were up a staggering 74% compared to the same period in the previous year. In January 2023 alone – traditionally a quiet month – the number of lots offered was 3,665, with 2,507 being sold. This was 40% more homes by value than in 2019.
Landlords out, landlords in
According to the English Housing Survey, between 2019 and 2022 almost half a million rental homes were lost as landlords sold up, and many of these properties went to auction. But in fact, many of them are now being bought up by existing or new landlords.
Figures from the National Residential Landlords Association show that although 19% of landlords were selling, 13% were buying.
Some of the landlords selling have been put off by recent and pending tax and legislation changes, or could be planning to put the sale money into a pension.
But it’s all good news for people who want to buy. Richard Worrell of Propertymark’s National Association of Valuers and Auctioneers said: “We are seeing a lot of sellers overpricing their properties as they want to sell at a price they would possibly have got last year.” Valuers have been advising sellers to expect a lower price now – which is great news for buyers.
Tenant demand is also soaring. Zoopla says there are 78% more people looking for homes than normal, while the total supply of rental homes is 37% below normal. That equates to 11 tenants for every property.
And, according to HomeLet Rental Index, average rents reflect this, having gone up by over 10 per cent in the last year alone.
This combination of falling values, rising rents, and rising demand make the ideal conditions for investors, and the auction process makes it easy to buy.
Why buy at auction?
Since the Covid-19 pandemic, property auctions (like many things) have gone online, making it simple to bid from home rather than perhaps travelling a long way to attend auction rooms. (Take time to register before the day of the auction because it can take some time to do.)
It’s a much faster way to buy a home – and sometimes you don’t even have to wait until the auction date. Many auctioneers will consider bids made in advance, and you could cut out the competition.
On the day, there will be a wide range of properties, and the sale is almost certain to go through, compared to up to four months wait when buying through the normal processes.
There are two methods of auction: “traditional” and the “modern method of auction” (MMA).
With the first, the buyer exchanges contracts and pays 10% of the purchase price on the day. Neither buyer nor seller can pull out. You can usually have your rental property in your hands after 28 days.
With MMA, either party can still pull out within the first 28 days. However, most sales go through as buyers pay a non-refundable fee, and it’s in the interests of the seller not to have to wait until another auction. The usual completion date is within the next 28 days.
Auction properties tend to be bought by investors, landlords and cash buyers, however anyone can buy a house via an auction, including First Time Buyers.
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