The property market may be in the doldrums, but try telling that to the 300 or
so people who recently packed the first-floor banqueting suite of Leeds
United FC’s ground, Elland Road. Usually, the place is crammed with football
supporters and pundits dissecting the match; on this occasion, it was full
of investors poring over a catalogue of 105 houses and flats coming up for
auction.
Among the crowd was Doug McLean, 39, director of a sandwich company and a
partner in three bars in Bradford. McLean, an auction novice, chose a seat a
few rows back and waited patiently for Lot 81, a two-year-old two-bedroom
Barratt flat on the canal in Bingley, near Bradford. The property was
offered for sale new at £165,000 in July 2006 and had never been lived in.
At auction, the guide price was £95,000plus. McLean wanted it for his
ex-girlfriend and son.
The auctioneer asked for an opening bid of £100,000. McLean and one other
bidder had pushed the price to £109,000 when a third joined them at £1,000
more. With an almost imperceptible nod of the head, McLean’s final bid of
£111,000 brought the hammer down. “I was willing to go to £115,000, so I was
happy with the final price,” he says. “I can only imagine this property was
bought off plan with the intention to rent – but the owner has been unable
to find tenants. I think I have got a bargain and I will definitely be going
to the next auction to look for an investment. I still think property
represents a better pension than anything else.”
McLean is one of a growing number of small-scale investors and private buyers
found at auctions these days, apparently undaunted by a slew of reports –
including the latest monthly survey by the Royal Institution of Chartered
Surveyors (Rics), released last week – suggesting that the down-turn in
house prices is the worst since the slump of the 1990s. However grim the
outlook, it seems some people believe there is still money to be made from
property – provided it is bought at the right price.
Nighat Khan is among them. A former customer-relations executive and mother of
three, she last month made her third purchase at auction: a repossessed
modern three-bedroom semi in a small gated development near her home in
Slough. She paid £249,000 for the house, which first sold for £325,000 two
years ago and was more recently advertised by an estate agent at £289,000.
“I bought it because it was cheap, below market value,” says Khan, 36.
“It just needs a good clean and a little bit of cosmetic work to make it like
a new home again. I’m not sure yet whether to rent it out or wait a while,
then sell it – either way, it represents good value.”
Khan bought her first house at auction four years ago, paying £131,000 for a
run-down three-bedroom semi in Slough, a property she rents out, and that
has been valued at £210,000. Two years later, on the advice of her brother,
she paid £180,000 for a piece of land with planning permission for eight
flats in her home town, Sheffield. She is now selling the land and expects
to make a £60,000 profit.
“I have always been passionate about property and I know there is money to be
made,” says Khan, who gave up her job last year to work from home. “I am
always a little nervous, but I set myself a limit and would not exceed it.”
Repossessions, such as Khan’s house and McLean’s flat, account for a large
percentage of auction catalogue entries. This figure is expected to rise
further, with the Council of Mortgage Lenders predicting that more than
45,000 homes will be repossessed this year – an average of 124 per day –
against 27,100 in 2007. Many of those are new properties, with white goods
still under wraps, bought off plan two or three years ago when developers
were offering incentives to investors and buy-to-let mortgages were easier
to come by.
“Among the current repossessions are many city-centre apartments, often sold
with the promise of securing high rentals, which are still standing empty,”
says David Sandeman, managing director of the Essential Information Group
(EIG), whose website lists every auction past and present. “Many have never
been lived in. Where there are several empty apartments in one block,
particularly in some northern cities such as Leeds, the communal areas
become scruffy, with the grass uncut. They are now being offered for sale
for considerably less than the original price.”
The number of residential properties offered at auction rose by 14% in 2007 to
30,551, and the total turnover rose by more than 10% to £3.6 billion,
according to EIG. The proportion actually selling, however, is falling:
EIG’s figures show that only 63% of the 7,785 residential properties offered
in the final quarter of 2007 sold – down from 76% in the same period of
2006. This left 2,918 properties unsold, a rise of more than 70% on the
previous year.
“Fears over further house-price falls have taken some stimulus out of achieved
sales at the auction houses as specialist lending has all but evaporated,”
says Oliver Gilmartin, an economist at Rics. “While lots offered at auction
have stabi-lised, we expect a tougher year in 2008 for many at the margins
as mortgage providers become more selective.”
The situation can vary from sale to sale. At Allsop’s two-day sale in London
last month, at which about 40% of the properties on offer were
repossessions, 320 lots were sold – 88% of the total offered – raising a
total of £56.24m. Many of the properties were from outside London, as
auctioneers are trying to overcome the “flatter” northern market and
maximise competition, and 80% went to people from the region in which they
were located.
“We’ve been selling between 85% and 90% of each catalogue,” says Gary Murphy,
head of residential auctions at Allsop. The key, he says, is a realistic
reserve, discounted slightly from what the auctioneer believes will be the
ultimate price. “To succeed, we have to create a market – if people
immediately think a property is too expensive, they won’t come to the
auction.” So, does it make sense to buy at a sale? Yes, says Murphy, but
there are provisos. If you’ve never been to an auction before, doyour
homework first (see panel, right). You must be ready to pay 10% there and
then, with the remainder usually due within 20 working days, so you should
ensure the money is in place. “You’ve got to be careful about every step you
take,” Murphy says. “If you’re not happy, don’t bid.”
There are ways to take advantage of an auction without actually bidding: one
is to buy up property that has remained unsold because it has failed to meet
the reserve. This has the advantage that you can buy at a fixed price,
although the same rules on payment apply.
Alternatively, you can try to get in at the start and make an offer prior to
the sale. This might not work if the vendor is a bank, building society or
public body, with a legal obligation to obtain the best price for their
client, but a private seller may accept an offer if they think it’s
goodenough. “Generally, you’ve got to convince us we’re not going to do any
better in the auction room,” Murphy says.
When are the next auctions?
March 26: Allsop, Café Royal, London W1; www.allsop.co.uk.
April 3: Eddisons, Elland Road stadium, Leeds; www.eddisons.com.
April 16: Andrews & Robertson, New Connaught Rooms, London WC2; www.a-r.co.uk.
April 17: Pugh & Company, Old Trafford stadium, Manchester; www.pugh-company.co.uk.
For full listings,visit www.
auctionpropertyforsale.co.uk and www.eigroup.co.uk.
Place you rbids
- A ninth-floor tenanted flat on the banks of the River Tyne in Gateshead.
Guide price £100,000plus.
Eddisons, 0113 243 0101, www.eddisons.com
- A three-bed terraced house in Stockwell, London SW8. Guide price
£350,000-£400,000.
Allsop, 020 7437 6977, www.auction.co.uk; The Property Centre, 020 8681 8191, www.property-centre.co.uk
- A five-bed Victorian house in Shropshire with indoor pool and 1¾ acres.
Guide price £700,000-£750,000.
Allsop, as before; Berriman Eaton, 01746 766499, www.berrimaneaton.co.uk
- A detached property in Epsom, Surrey, currently laid out as four flats and
four maisonettes. Guide price £1.2m-£1.3m.
Allsop, as before; The Property Centre, as before
Ref Lucy Denyer's article in the 23rd March ST, has she checked out Bosham Hoe on Chichester Harbour ?
Andrew Godber, Arundel, West Sussex,