As the UK’s property market shows signs of slowing down post-new stamp duty land tax rules and amid uncertainty ahead of the EU referendum, interest from all-comers into property auction sales appears to be on the up, according to a leading auctioneer.
While auction houses are generally considered the home of investors, buy-to-let landlords and people looking for a fixer-upper project, there are signs that the ability to settle on a price and sign a legally binding contract in a single day is attracting more interest from so-called ‘normal’ or ‘mainstream’ home-buyers.
“More and more sellers are seeing the benefit of selling their properties by auction and the prices we've achieved for our vendor clients so far this year are encouraging more sellers to contact us,” said Andrew Parker, managing director at Graham Penny Auctions in an interview with Property Investor Today.
“The bonus with buying a property at auction rather than through a private treaty sale is that it's a quick process and when the hammer falls the sale is secure, contracts are exchanged and the sale is [usually] completed within a month,” he added.
But the prices achieved and speed of the transaction aren’t the only reason for the increased popularity in buying or selling a residential property via auction. Another – and perhaps more compelling – reason behind the increased interest, involves the new tax rules over owning more than one property. The details of the new tax rules – which include a stamp duty due increase of 3% if the buyer already owns a property – are encouraging people who perhaps previously would have made a second purchase while still waiting to sell their existing home, to turn to auction in order to achieve a quick sale to ensure they don’t lose out on the home they want to buy while also avoiding paying a higher stamp duty charge.
While it is permissible to claim the additional stamp duty tax payment back if one person owns two properties for less than 36 months, some home-movers aren’t willing to take the chance. In these circumstances it’s understandable why selling via auction might be deemed preferable as there is less risk of incurring additional stamp duty costs this way.
It’s not just auctioneers who are telling the press about the changing face of the auction room, figures from the respected Essential Information Group show that although it’s monthly data does show there were 1.4% less residential lots sold at auction in April than March, it’s a marginal decline from the level of lots sold in March. And let’s not forget the impact the current Brexit uncertainty is having on investors and the property market, that is likely playing a part here too.
“Following the stamp duty changes that came into effect early last month, many market commentators expected the private treaty market to decline quite sharply in April,” said EIG Managing Director David Sandeman in a monthly newsletter. “However, the residential auction figures…show that it was very much business as usual in the auction market.”
As with most changes in rules, markets and mind sets – they take time to be fully realised. However, this shift on the property market has all the hallmarks of being one that’s here to stay.