Changing times at auction - Samuel Wagner, BidProp.co.uk

Changing times at auction

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.

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.