Auction bargains

libitina_2

I've noticed over the past couple of months that a growing number of properties are being sold at auction. Also, a growing proportion of these properties are selling at lower prices than previously bought (nethouseprices et al) This is especially so for flats (sorry, executive apartments )
Has anyone got any more info on this?

RHemmings

libitina wrote:

I've noticed over the past couple of months that a growing number of properties are being sold at auction. Also, a growing proportion of these properties are selling at lower prices than previously bought (nethouseprices et al) This is especially so for flats (sorry, executive apartments )
Has anyone got any more info on this?

Where did you see this information?

libitina_2

Barnard Marcus Auctions have put on a special auction on today which seemed to be solely for the purpose of shifting Halifax reposessions by the looks of it. http://www.barnardmarcusauctions.co.uk/

RHemmings

I looked on the Barnard Marcus website. I couldn't see much data for today's auction, but I looked through the previous auction. You mentioned flats. I had quite a lot of difficulty finding the properties mentioned in the land registry figures. I did find one, Flat 17, Whitley House, Churchill Gardens, London SW1. If I read the figures on the auction site correctly, it sold for £125,000. Looking up the same property in the land registry figures, it looks like it sold on the 26th of May, 2006, for £202,000.

Can someone check that I have this right? I clicked on "results", and tried a few of the flats until I found one on http://www.nethouseprices.com. The flat I mentioned is the first one where I found a clear match between the two.

£125,000 is an awful lot less than the previous quite recent sale price. Have I got something wrong?

Not only is this a reduction in price justifying the words "house price crash", this is a flat in some building. There are flats in that same "Whitley House" numbered up to 36. And there seem to be a lot of house "Something" House buildings in that street. It must be very annoying to have bought a flat in a building like that and then have somebody come in and buy a flat at much less than you paid.

RHemmings

Given discussions in the papers, the television, and on the web about people not being able to afford their mortgages, I'd like to bump this thread. This is what can happen when people get repossessed. Properties sold for much less than previous sale prices. Surely combined with news indicating that the number of repossessions is likely to keep rising, what prices these properties achieve compared to previous market value is relevant?

Doozergirl

RHemmings wrote:

Surely combined with news indicating that the number of repossessions is likely to keep rising, what prices these properties achieve compared to previous market value is relevant?

Not at all. A small minority of property sales occur at auction. The vast majority of people there are property investors looking for a good deal at below market value; either a decent mark up for resale on the high street or that elusive rental yield.

Not reflective of the property market in general at all. Auction sale prices do themselves seem to follow a trend; similar size properties sell for similar prices.

RHemmings

Doozergirl wrote:

Not at all. A small minority of property sales occur at auction. The vast majority of people there are property investors looking for a good deal at below market value; either a decent mark up for resale on the high street or that elusive rental yield.

Not reflective of the property market in general at all. Auction sale prices do themselves seem to follow a trend; similar size properties sell for similar prices.

The Barnard Marcus site has a lot of properties sold. Assuming that "property investors" are going to flip these properties, we should see them come on the market fairly soon, and then sell for market value.

I remember speaking at length to someone who experienced the last big crash. He said that once the market started falling, and people realised it, then as soon as a property sold at a knock-down price at auction, that was the price of your house. I can't see auction properties not having an effect. And in the area I live in, there have been more than just a few rare properties sold at auction.

But there must be other consequences to these "few" sales. Let's say that you have a large block of flats such as the one I mentioned. If a single flat sells for far less than other flats sold for, then that new owner can afford to rent the property out for a rent much less than other owners in the block of flats can afford. Then if there is any competition for tenants, say if too many newbuild flats are built compared to the demand, then those who bought for less will be able to undercut other owners. Leading to other owners being more likely to experience voids, and a vicious circle if they then can't pay the mortgage.

Doozergirl

RHemmings wrote:

The Barnard Marcus site has a lot of properties sold. Assuming that "property investors" are going to flip these properties, we should see them come on the market fairly soon, and then sell for market value.

Yes.

RHemmings wrote:

I remember speaking at length to someone who experienced the last big crash. He said that once the market started falling, and people realised it, then as soon as a property sold at a knock-down price at auction, that was the price of your house. And in the area I live in, there have been more than just a few rare properties sold at auction.

How would enough members of the public know what an auction property fetched back then in order for it to set the new ceiling price for a street? It's very easy for people to see what I have paid for a property thesedays, but it doesn't affect in the slightest what they pay for it.

RHemmings wrote:

And in the area I live in, there have been more than just a few rare properties sold at auction.[/

I didn't say rare few, I said a small minority of property sales, meaning in comparison to the numbber that sell through conventional means. You'll also find that if you start looking for auction properties that there are a fair few about, there always have been.

RHemmings wrote:

If a single flat sells for far less than other flats sold for, then that new owner can afford to rent the property out for a rent much less than other owners in the block of flats can afford.

Yes. But why would they rent out a property at much less when a small undercut gets you exactly what you want?

RHemmings

Doozergirl wrote:

Yes.

How would enough members of the public know what an auction property fetched back then in order for it to set the new ceiling price for a street? It's very easy for people to see what I have paid for a property thesedays, but it doesn't affect in the slightest what they pay for it.

That's what I was told. Even if the general public wouldn't have known back then before land prices went on the net, surveyors would. Wouldn't they?

I didn't say rare few, I said a small minority of property sales, meaning in comparison to the numbber that sell through conventional means. You'll also find that if you start looking for auction properties that there are a fair few about, there always have been.

Yes, I've noted that. But the proportion of properties selling at auction seems to have gone up in my area because the general market has slowed down. With the currently publicised affordability problems, I think the property market is likely to slow further.

Yes. But why would they rent out a property at much less when a small undercut gets you exactly what you want?

Whether owners who bought at auction are getting all the tenants due to a small undercut, or due to a large undercut, doesn't really matter to the flat owner who can't get a tenant. I would think that a £25 or £50 a month undercut for a like and similar property would be enough to get the tenant. And if there is competition for tenants, then someone's going to end up with a void. If the owner with the void has a massive edge of affordability negative cashflow even with a market rent mortgage, then that's a recipe for trouble. They can try dropping rents to get tenants, but those who bought cheaper can bid down until the owner of the expensive flat can't go any lower.

Doozergirl

RHemmings wrote:

Whether owners who bought at auction are getting all the tenants due to a small undercut, or due to a large undercut, doesn't really matter to the flat owner who can't get a tenant. I would think that a £25 or £50 a month undercut for a like and similar property would be enough to get the tenant. And if there is competition for tenants, then someone's going to end up with a void. If the owner with the void has a massive edge of affordability negative cashflow even with a market rent mortgage, then that's a recipe for trouble. They can try dropping rents to get tenants, but those who bought cheaper can bid down until the owner of the expensive flat can't go any lower.

I think you're going off on a tangent here. It's fair to say that many people have bought to let thinking that topping up on the mortgage is a good idea. These mortgages will be at least a burden to those people for the next few years but it's got naff all to do with auction prices. Except that some of these properties are already ending up in the sale room.

Experience has taught me how the market works, how auctions work and how one low sale at auction has no effect on property prices. I've bought and sold auction property and it doesn't affect the estate agent's valuation, the buyer's offer or the surveyor's valuation when sold on. Neither does it affect asking prices in the street. At all. The auction market is a niche market for people prepared to gamble with their cash - if it did have any effect then auction prices and open market sale prices would have evened out a long time ago.

RHemmings

Doozergirl wrote:

I think you're going off on a tangent here. It's fair to say that many people have bought to let thinking that topping up on the mortgage is a good idea. These mortgages will be at least a burden to those people for the next few years but it's got naff all to do with auction prices. Except that some of these properties are already ending up in the sale room.

I don't think that it's a tangent. BTL is a business, and I don't believe that the rent is an irrelevance for all but a tiny fraction of landlords. When you're in business, and if there's an oversupply of your product, then you have to compete. If other people can or have bought the same product as you for a much lower price, then they're going to be able to out-compete you.

And BTL in great big newbuild flats is a classic example of competition, as the flats are often quite similar, and naturally in the same location. So if the flats aren't full of tenants, then there's competition.

Experience has taught me how the market works, how auctions work and how one low sale at auction has no effect on property prices. I've bought and sold auction property and it doesn't affect the estate agent's valuation, the buyer's offer or the surveyor's valuation when sold on. Neither does it affect asking prices in the street. At all. The auction market is a niche market for people prepared to gamble with their cash - if it did have any effect then auction prices and open market sale prices would have evened out a long time ago.

One low sale at an auction might not make much difference, but a growing number, as seems to be the case, will.