Changing times at auction

Jan 15, 2010

First time buyers used to make up a huge percentage of auction buyers. As property prices, rose, many young people turned to property auctions as a means of securing a bargain. As a number of auction properties are in need of a bit of care and attention, it also offered these buyers the chance to add “sweat equity” to the property, thus increasing the home’s value and decreasing their risk of finding themselves in negative equity, should they ever have to sell.

Times have changed drastically. One leading report states that investment buyers now make up over 90 per cent of all auction purchasers, suggesting that first time buyers are nowhere to be found in auction rooms. This time last year, they made up nearly a quarter of all buyers at auction and prior to that, an even greater percentage.

The reasons are relatively simple: mortgages for first time buyers are difficult to come by as most require a fairly substantial deposit and limit income multiples. With lending so restricted, owner-occupiers are being squeezed out of property auctions.

In there place are professional investors. These savvy fellows have cash in bank accounts which is earning little interest and sensing that property prices are still relatively low, are keen to make this money work for them. Rents are rising in the private sector and the prospect for capital growth, even over the short term, looks relatively good. They are not just snapping up traditional auction properties, either. New build properties that have been disposed of by buy-to-let landlords and even ground rent investments are proving popular with this sector.

The good news for first time buyers is that mortgage lending is beginning to ease, although I think the days of 100 per cent mortgages and borrowing six times one’s income are long gone. Those who are keen to venture into the auction market will still find good value here but to secure the best mortgages available, will still have to rely heavily on the Bank of Mum and Dad to raise the type of deposit needed by most banks.

The article was written for Buy Association and appears as part of monthly column about auctions http://www.buyassociation.co.uk

Buy to let resurgence?

Dec 9, 2009

According to RICS, there has been a resurgence in the buy-to-let market. Property has traditionally been seen as a safe, long-term investment and with rents now on the rise, investors are seeing better returns from property than from the stock market or the bank. However, those who are going back into buy-to-let are experienced landlords who are ready and willing to put down significant deposits to ensure rent more than covers the mortgage.Buy to let resurgence?

Buying an investment property through auction may sound tempting as these properties are often keenly priced. Buying through auction requires a lot of preparation, though, so research is vital. Just because the guide price on a property looks relatively cheap or the picture looks nice, it does not mean it is a good investment.

Before you even look online or pick up an auction catalogue, make appointments with lettings agents in your chosen area. Ask them what is in demand, what type of properties let quickly and what does not. What streets are most desirable? What are the most popular blocks of flats and why? Armed with this knowledge, you should now know what sort of property you are looking for.

Read through the details of the property on the auction website or catalogue. If it meets your own criteria, arrange a viewing. Do not just look around – open cupboards, check out the boiler and have a good look at the roof. Will major renovations be required? Are there any maintenance issues? Will you have to upgrade any major appliances? If so, factor these costs into your calculations.

I would then recommend approaching the lettings agents again. Ask if your chosen property would let quickly and if so, what sort of rental return would be realistic. Bear in mind that you may have to furnish the property, as well, which will be an additional cost.

You must also arrange financing well in advance of the auction. You will be required to put down a ten per cent deposit immediately if your bid is successful. You will then have to arrange financing for the remaining sum within 20 to 28 days, depending on the auctioneer. It is vital that you speak to a lender in advance of the auction to ensure you can access financing. Otherwise, you may find yourself unable to complete and financially liable. Most banks and building societies will agree a mortgage in principle, which is also useful as this will let you know how much you can bid.

Armed with this information, you can bid at auction with confidence. If you know your upper limits financially, you will know when to keep on bidding or when to back down. With the right property, finding success as a landlord is certainly a lot easier!

The article was written for Buy Association and appears as part of monthly column about auctions http://www.buyassociation.co.uk

Reflections on the auction market

Nov 26, 2009

Property Auctions have changed drastically over the past year. The Sunday Times reports that just twelve months ago, over a third of homes going through auction were repossessions but now these represent less than ten per cent of transactions. Government pressure, low interest rates, and a pick up in the property market have all contributed to this but the geographic locations of the lots are notable. Almost none of the repossessions are in southern England – the few repossessions coming through auction are almost exclusively from the north of England.

 
According to one research report, homes in the south are selling in approximately six weeks but are taking twice as long to shift in the north. House prices have also accelerated faster in southern England and despite the housing crash, the average house price in London is £302,411 while those up north are only £106,769 according to the Land Registry. The north/south divide is growing by the day and has been exacerbated by the recession.

 
Nowhere is this more apparent than in northern City centres. Large blocks of flats were built specutively and aimed at buy-to-let investors who thought they could fill them with young, professional tenants. These tenants proved to be few and far between, and most of the flats sat empty. Facing mounting loses, many investors sold the flats for less than they bought them for or even handed the keys back to the bank.

 
These northern City centre flats comprise the bulk of repossessions coming through auction houses. What is more, banks are extremely reluctant to lend on these flats going forward. Only 27 per cent of The Nationwide’s mortgages were to northerners; the rest to those living in the South. An even smaller percentage was lent on city centre flats, most of which are being severely down valued. With lending restricted and no tenants to be had, things do not look good for owners of these flats. People in the north also tend to borrow more – on average 75 per cent – than their counterparts in the south. With such high gearing, things look precarious.

 
No auctioneer wants to see repossessions. Each one represents someone’s personal heartache but we need to build homes that actually reflect society’s needs. Many of these flats were built on the basis that ‘if we build it, they will come’. City centre living was unproven, though, and while I think these flats will eventually find buyers and occupants, it may take years.

The article was written for Buy Association and appears as part of monthly column about auctions http://www.buyassociation.co.uk

BidProp is launching soon!

Oct 12, 2009

We have received some very exciting instructions but are now looking to significantly increase the volume of instructions through close collaboration with a leading UK property player.

With these exciting news in mind, we have decided to postpone our launch to a later date, we will shortly revert with the exact date shortly..Unfortunatly, this now means that we are looking at launching in the early part of 2010.

BidProp has started sourcing properties

Sep 21, 2009

BidProp is now sourcing properties. Do get in touch with us if you are a professional seller and want to discuss how BidProp can help sell your stock in your area.

Property Auctions Online

Sep 8, 2009

Property auctions

The internet is changing the way we search for homes.
A recent statistic showed that 70% of people now start their search for a new home online and I would venture that that figure is rising. The internet allows you to search widely and relatively quickly, gathering a huge amount of information, from the comfort of your own desk.With a few keystrokes, you can find out the price, the floor plans, and local amenities without ever having to speak to an estate agent. Only once you have found something suitable do you have to make face-to-face contact. While the internet has revolutionised conventional home buying, there is one place where it has been slow to catch on: property auctions. Some auction houses will allow you to see the lots on their website but details are scarce. Others will allow you to watch the auction live via the internet but you still have to bid against others in the room via the telephone. Consequently, a lot of people who might consider purchasing a home at auction are going to be put off. Auctions are often held in stuffy hotels in the middle of the day. Unless you are willing to take a day off work to participate in the auction, it will be difficult to make a bid.

Changes

Auctions have been slow to change because successful bidders must process legally binding paperwork immediately. Until recently, there has been no method of processing the necessary contracts online but that is soon to change. Some clever clogs have found ways and means to make internet transactions legally binding so changes are inevitable. Not all of these changes will be welcome, though. Professional investors have long seen auction houses as their domain and having to bid against others, eBay style, is going to open property auctions up to a whole new audience. By setting a ‘maximum price’, bidders can simply set forth their highest bid and the computer programme will incrementally increase their bid until the maximum price is reached. It means property auctions will become more accessible to first time buyers and property auctions will probably see more transactions. In the same way that conventional newspaper classified ads made way for the likes of eBay and Gumtree, so too will the traditional auction room. Traditional auction rooms have always been a bit intimidating and it has been easy to get carried away in the charged atmosphere. With the online revolution, property auction rooms are never going to be the same.

Samuel Wagner

Samuel Wagner is the director of BidProp, a new online property auction website that works with professional sellers to accelerate the sale of residential properties in Greater London.

The article was written for Buy Association and appears as part of monthly column about auctions http://www.buyassociation.co.uk

If you are a professional seller - please get in touch !

Aug 12, 2009

Looking to sell residential properties ? Get in contact with us on info@bidprop.co.uk or phone us on 0845 643 6306 and lets discuss how we could help you speed up the sale of your properties and ensure that you get maximum exposure. We could help you sell an individual units or portfolio completely for free.

July turns positive

Aug 6, 2009

Halifax index shows an increase of 1.1% in the average UK house in July. The trend is even stronger for central London which indicates a rising trend for the last four month, at least accoding to Knight Frank. Prices for homes valued above £1m in the capital rose 1.5 per cent in July, according to Knight Frank, whose index show prices climbing with more than 5 per cent since April, although with a net fall of 14.4 per cent on an annual basis.

On London supply seems to be held back whilst demand, especially from overseas buyers have increased in the recent month. According to the Financial Times "the volume of properties available in central London in July was down 34 per cent compared with the same month a year earlier. The number of properties coming to market in autumn shows no improvement, however, with the pipeline down 42 per cent over the same period." (FT, 29 July, 2009)

The number of mortgages improved also increased showing an improvement in housing market activity. Starting from a very low level with less than half the level in mid 2007, Bank of England industry-wide figures show that the number of mortgages approved to finance house purchase increased by 22% between the first and second quarters of 2009 (on a seasonally adjusted basis).  Approvals increased for the fifth successive month in June and were 35% higher than in June 2008, but were nonetheless 58% lower than in June 2007.

The UK house price to earnings ratio  – a key affordability measure - has declined from a peak of 5.84 in July 2007 to an estimated 4.36 in July 2009. The long-term average is 4.0.

Data for June continues to confuse

Jul 13, 2009

Halifax June data shows a decline of 0.5% in UK house prices where as Nationwide index showed prices to be increasing (0.9%) for the same period.

There is consensus on a modest improvement in number of transaction, although still at low levels, and mortgages approvals increased for the fourth successive month in May.

The vast majority of agents and journalist in London seem nevertheless to write about a recovery and lack of supply. According to Knight Frank, Residential prices in prime central London rose 1.7% in June, the third successive monthly rise, according to the Knight Frank Prime Central London Index.

Halifax index finally turns up in May

Jun 23, 2009

The Halifax index shows a 2.6% increase in average UK house prices in May. There are som indication that the market might stabilize such as: 

• Number of mortgages approved (key indicator for house sales) increased by 19% between the final quarter of 2008 and the first quarter of 2009, on a seasonally adjusted basis. Approvals in the three months to March were, however, 45% lower than in the same period in 2008.
• Halifax May data also shows that house price to earnings ratio (another key indicator) - has declined from its peak of 5.84 in July 2007 to an estimated 4.36. The ratio is now at a level last seen in January 2003. The long-term average is 4.0.
• The average per centage of disposable incomes that goes to finance mortgages has gone down due to lower interest rates. The proportion of disposable earnings devoted to mortgage payments has fallen significantly over the past 18 months. Across the UK, average mortgage payments for a new borrower have declined from a peak of 48% of average disposable earnings in 2007 (Quarter 3 ) to 31% in 2009 (Quarter 1). Mortgage payments relative to earnings are now below the long-term average of 37% recorded over the past 25 years.

Rising unemployment and uncertaintity about interest rates in the coming years are nevertheless adding uncertainity about the future of house prices. The only thing certain seems to be the confusing message that local geograhical differences (in demand and supply of housing) looks set to increase and make national indecies (such as Halifax) less relevant for predicting prices in London.

UK House Prices continue to Fall in April

May 11, 2009

House prices fell by 1.7 per cent in April according to Halifax, returning the average price of a house to where it was in 2004, according to data from Halifax published on Wednesday.

But the 1.7 per cent fall in April was the smallest monthly decline since December, and less than the 1.9 per cent drop recorded in March. The pace of decline has also slowed in recent months, helped by a rare rise in January.

Another house price index, aslo supported this, but indicate a less significant drop. The Nationwide recorded a 0.4 per cent drop in prices in April, leaving them 18.4 per cent below their peak.

The Land Registry data for March, which includes transactions that may have happened up to three months earlier, also showed a 0.4 per cent drop.