A public auction is perhaps the oldest method of sale, dating back to around 500 BC. Its survival is no doubt due to its obvious advantages. Auctions are fair, transparent, quick, efficient and, above all, certain. They deliver a binding contract of sale to buyer and seller at the split second that the hammer falls.
Parties to a private treaty property transaction often suffer a great deal of stress and anxiety whilst waiting for an exchange of contracts. But when it comes to trading assets in both the UK residential and commercial markets, auctions are able to offer these significant benefits.
Last year the total value of real estate transacted by auction in the UK was £4.633bn – of this £1.035bn (22.3%) was sold by the industry’s largest house, Allsop. Residential sales by auction make up the lion’s share – 69% or £3.19bn. What’s surprising though is that this residential total represents less than 3% by volume of all residential transactions in the UK. But this is changing.
20 years ago, the auction room was regarded as the domain of the professional property dealer. Today however, savvy first time buyers can be seen bidding for houses and flats against private buy to let investors, local builders and retired downsizers.
Although single vacant homes make up around half of the lots in the Allsop residential catalogue, there is an exceptionally broad selection of alternative stock available by value, type and location. The first sale of 2018, raised £75m. Lots ranged from a site on the Thames at Sunbury for £70,000 to an £8m 42,000 sq ft office building in Rickmansworth with consent for conversion to 71 flats.
For sellers the appeal of auction is significant. Allsop has a worldwide audience of around 120,000 registered bidders. Those who can’t attend the sale room will bid on the phone, by post and online. It’s as close to a perfect market as you can get.
With that in mind, the firm now offers a global online only auction service to residential developers for new homes off plan. The initiative is a natural evolution of the traditional method and draws competitive bidding from overseas and UK buyers for UK stock. The developer no longer needs to travel overseas to meet investors at exhibitions in expensive hotel suites – and bidders are able to purchase unconditionally online from anywhere in the world. All buyers and have a fair and equal chance of a binding purchase in real time, open market conditions.
Housebuilders and housing associations with residual build complete stock have recently opted for a hybrid ‘private treaty to auction’ approach. This method uses a longer pre auction marketing campaign of say six weeks. Interested parties are invited to purchase unconditionally on an auction contract either before auction day or through competitive bidding in the room. The sale event provides focus for all parties and creates a catalyst for legal commitment.
So, traditional auctions have modernised. The physical auction room will continue to play a part for as long the strongest prices continue to be achieved under the hammer – and for as long as bidders prefer to congregate physically. Purely online and hybrid alternatives are gradually finding their places in certain markets. This is evolution not revolution.
By Gary Murphy