Over the past few years, Property Auctions have enjoyed sustained growth both in absolute terms and relative to the property market as a whole.
But what is the outlook for Property Auctions in 2012?
To predict 2012 Property Auction activity, first we must consider the historical reasons for growth along with the underlying reasons that fuel the sector.
Generally speaking Property Auctions have been the favoured route for Councils, Housing Associations and Portfolios to efficiently shift large numbers of housing stock as well as private sellers looking for a quick sale.
However, over recent years a number of factors have contributed to the somewhat rapid growth of the Property Auction sector with some Auction Houses reporting 30% year on year growth for the past 3 years.
Factors driving recent growth in the Property Auction sector:
- Increasing number of TV shows about the property market and Property Auctions specifically ( e.g. 'Homes Under The Hammer')
- Growth of the Buy to let market
- Increased number of buyers looking to acquire property and investment property at bargain prices
- growing willingness of buyers to purchase dilapidated or structurally compromised properties and do them up.
- Over the recent 24 months an increase in the number of properties being sold from collapsed property portfolios
- larger than normal number of repossessed properties being sold by banks and building societies.
- Growth of the web as a means of promoting auctions and even the appearance of online property auctions themselves.
- Frustration with current property selling processes and the risks of Gazumping, Gazundering, Gazanging and so on.
- Gradual increase in repossessions (typically sold through Property Auction) in 2011 (35, 000 source. RICS)
So how will Property Auctions in 2012 fare?
With the general economic doom and gloom now well established and sharp corrections resulting from economic fallout of the Eurozone crisis being mooted, can we really expect any growth in the housing market in 2012?
Surprisingly yes if a recent RICS report is to be believed. Marginal growth is predicted. HMRC reported 850, 000 properties sold in 2011 and RICS are predicting 880, 000 in 2012.
Certainly the cushioning of the market resulting from continued interest from foreign investors seeking a safe haven, the ongoing housing stock shortage and predicted sustained low interest rates should all help prop the market up in 2012.
Of course there are many counter predictions for 2012 but even if the Property Market does further contract, many of the factors that underpin growth in Property Auctions may still increase.
Factors likely to drive growth in Property Auctions in 2012
- The RICS Housing Market Forecast published today (22 December 2011) suggested that headline level prices will decline by around three per cent across the whole of the UK. Such a decline in housing prices will see more home owners entering negative equity.
The added squeeze on household earnings will in all probability, sadly, result in an uplift in the number of properties being repossessed. RICS estimate the increase in repossession as likely increase from 35, 000 (2011) to 40, 000 (source: RICS)
- Many homeowners will be looking for a quick sale to avoid entering a negative equity situation.
- Growth of 'Buy to Let' in 2012 (we have seen renewed growth I the final quarter of 2011 according to CML.
- Councils and housing associations likely to sell off stock to improve liquidity
In conclusion, we feel that all the indicators for the property market for 2012 will favour the continued growth of the sector. In fact 2012 could well be the year of the Property Auction.