Be prepared for the seasonal nonsense from “expert analysts” about the property market “plunging” during August – about as meaningful as saying that Christmas card sale “plummet” in January!
The reality is that the reduction in transactions is not a reflection on the market trend, as such, but that during the school holiday period one or more of the parties involved is either away or working shorter hours to try to accommodate the so called “work/life balance”. I probably show my age when I say that the balance is simple – when you finish work you get on with life!
Reliable analysis is available
The most reliable analyst in respect of property auctions, which make good headlines but represent no more than 2% of property sales in the UK, is David Sandeman of EIG. His company has been recording all property auction transactions in every region of the UK for the past 30 years.
In August, David reports that notwithstanding the small drop in lots offered – down 3% to 3,650, there were gains made in lots sold and total raised (up 0.5% and 7.3% respectively) while the sale rate jumped 3 percentage points to 75.7%.
Auction conversion rates increase
When I speak to estate agents across the Southern region, they can only dream of such high conversion rates from initial instructions to sales.
The appetite for good quality commercial investments remains strong – self administered pension funds are awash with cash with no meaningful return from bank interest and a desire to benefit from the income and capital appreciation expected from a medium to long term commitment to property.
We have, however, found a hardening of prices in the secondary shops with living accommodation above – rather like corner and back street pubs from the 60s – there is unlikely to be a sustainable demand from reliable tenants. There is still demand for buy to let in the residential sector, despite the efforts of the government to demonise small private landlords.
Online auctions are an option not an alternative
Online auctions are becoming more popular, as is everything internet related. It is, of course, little more than a marketing ploy. Already potential purchasers at traditional auctions can download the catalogue and legal packs, make appointments to view and bid online. The main difference is that online the seller can choose his or her own date to close the bidding – the buyer still has to register, be money launder checked and lodge a deposit before the closing date, as the fall of the electronic hammer creates a binding contract – just like a “proper” auction. The online auction loses the atmosphere that only a collective auction with hundreds of buyers in the same room can provide. Indeed, in the regions, a large collective property auction is as much a social occasion where private buyers and professional dealers gather to gauge the market in real time and to see who is on the scene. Those not wishing to travel can still bid by proxy, telephone or online.
The real benefit of online is that it is not regionalised and can offer a credible alternative to the “best and final offer” scenario where buyers bid blind by submitting brown envelopes to the estate agent. The runners up always question whether it was fair and open and frequently say that had they known the price, they may have bid a little more! And, of course, they are not duty bound on acceptance and can withdraw the offer at any time prior to formal exchange.
My next column will concentrate on the results of the September auctions – always a good indicator for the final months of the year. The rooms are normally packed, as little goes on between July and mid September and so there is a pent up desire to get back to business after the summer break.
