Properties are going for a bargain at repossession auctions

Dec 17 2008 by Sri Carmichael, Consumer Affairs Reporter - London Evening Standard -

THE number of repossessed homes up for auction in London has more than doubled in the past year, figures show today.

In the last three months of this year 455 repossessed properties have been offered for auction, compared with 202 in the same period last year, which was when the housing market was at its peak.

And the growth in supply of distressed residential sales over the past year is accelerating.

The number on offer in auction rooms soared more than 53 per cent this quarter from last quarter after waves of job cuts across London, many in the City.

Leading auctioneer Allsop, which will hold the last residential sale of the year in the capital today, said credit crunched mortgage lenders are also increasingly turning to auctions in a bid to claw back money on bad loans as fast as possible.

Partner Gary Murphy said: "It's indicative of how slowly estate agent sales are moving and how much banks need cash that they would rather auction properties."

Nationally the percentage of repossessions going to auction has risen steadily over the past two years from 13.9 per cent at the start of last year to around 35 per cent now.

At a busy Allsop auction at the Cumberland Hotel, near Marble Arch, on Monday, more than 250 lots from around the country were on offer.

Several repossessed homes in London went for bargain prices of up to 40 per cent below the values currently given for similar properties by estate agents.

A two-bed canal-side modern apartment in Islington sold for £260,000 when local agents price similar homes at between £400,000 and £450,000. A two-bedroom flat in a Victorian conversion in Tooting was bought for £165,000, at least £80,000 below the estate agent value.

A Victorian townhouse in Kensington, split into five two-bedroom flats and two studios, was snapped up for £2,030,000.

But Mr Murphy said: "It's a common misconception that auctions sell properties cheap. They don't, they sell them at their true market value - what people are willing to pay.

"Estate agents are still overpricing properties, auctions are realistic."

Most buyers are professional investors but private individuals make up a small and growing proportion of buyers.

"It's still difficult to get a mortgage so you need to have a lot of cash and be able to move quickly," Mr Murphy said.

"But those in strong positions realise auctions are a good place to buy a property at its true value."

A handful of first-time buyers, some accompanied by their parents, attended Monday's auction.

Johanna Hooper and her boyfriend James Bull, both 25, wanted to get a feel for how the process worked and an idea of prices.

Adam Taslaq, 24, bought a three-bedroom house in Colney Heath for £200,000 with the help of his father.

There were also people looking to relocate. Maggie Cahill, 60, moved to London from Yorkshire in the summer to be closer to her family and where she grew up.

Ms Cahill, a retired banking customer services manager, is living with her son in Hanworth, Middlesex, while she searches for a good-value property to buy in Chiswick or Twickenham.

"I know the area I want to live and I'm just waiting for the right lot to come up. People are still refusing to drop their prices with estate agents so that's why I'm trying auctions.

"I made money on my property in Yorkshire because I bought in the last recession and sold before the market really started dropping so I've got a good amount of cash. I may even buy two properties - one to rent out.

"The places I was interested in today were being sold by the police but they were withdrawn at the last minute unfortunately," said Ms Cahill.

As yet properties sold by private individuals keen on a quick sale are rare.

David Sandeman, managing director of EIG, said: "People can't get their heads around the fact they need to offer a low reserve price to attract bidders, but that could change as people get more desperate to sell."

A new auction house targeting vendors tired of being unable to sell through estate agents is opening in Chiswick in the spring. West London Property Auctions will hold its first sale on 9 March at Chiswick Auctions on Chiswick High Road, with two others following in May and July.

All auctions will take place in the evening to cater for people working during the day.

Lee Osborne, director and co-founder, said: "People are getting more realistic, they know property prices are coming down.

"Even though the market's in trouble people still have to sell and buy."