The proportion of properties that sell has been falling for some time and the low sale rate reflects the fact that sellers are not being realistic and are setting their reserve prices too high, says Julian Thompson of EIG.
It is also a reflection of the credit crunch, with banks less keen to lend to builders and developers. Properties sold at auction are often in need of renovation or repair, and with lenders tightening up their criteria, finance is harder to come by and more expensive.
'Some properties were down to about 50 per cent of their original purchase price'
The credit crunch and higher interest rates are taking their toll on both families and buy-to-let investors. At an auction last week held by London auctioneer, Allsop, of the 551 properties offered only 367 were sold but an astonishing 60 per cent of these were repossessions, or put up for sale on behalf of receivers.
“This is the largest concentration of repossessions and receivership lots we’ve ever sold — it’s very much the credit crunch in action,” commented Gary Murphy, a partner at Allsop.
Allsop has been monitoring the average price reduction on new- build properties being offered for resale at auction and has discovered that it is about 25 per cent. “That’s just the average — some properties were down to about 50 per cent of their original purchase price.
“New-build flats would be up there as one of most attractively priced lots in this auction,” Murphy said.
Another reason for low figures could be potential buyers holding back, to make an even lower offer after the sale, Murphy believes.