Auction Property Not Raising What It Used To - By: Catherine Harvey
With all the uncertainty surrounding the UK property market at the moment, it would seem that previous thoughts that the banks had all the control are actually not quite accurate. There are two groups of people at the moment, separated by a huge divide that gets wider by the day. This rich/poor divide harks back to many years ago and the UK was getting used to having more disposable income and that gap was reduced somewhat.
Today, that gap is widening once again. There are families up and down the country experiencing home repossessions at ridiculous levels due to the biting credit crunch that threatens to end up in a full scale recession. Businesses are cutting back on their outgoings which means jobs are being lost at a rapid rate. For some, their workers are simply replaced with the cheap labour that has migrated into the UK. So, jobs are more difficult to come by and secure.
Utility expenses are in the news everyday with their rising costs, as is fuel and food. Mortgages are hard to get yet property prices have dropped dramatically. Property prices don't really matter if you can afford to sit tight and ride out the storm until prices rise again - and they will do - no recession ever lasted indefinitely. For first time buyers who can afford a mortgage, this is probably a good time for them because it was getting to an increasingly difficult time for anyone to be able to get on the property ladder.
The repossessions that have taken place by the brutal force of the banks who are in a hurry to regain their money are normally sent to an auction. This is a quick way for the banks to recoup some of their money quickly and bargains were snapped up. However, things are changing. Banks are getting greedier and not wanting to sell for a low price but that is the whole point of auction property - it is cheap.
A recent sale saw a whole stock of auction property still sitting there at the end of the day unsold. Banks do not want to lower their prices but buyers are holding fast and refusing to bow to their greedy pressure. That is the whole pleasure of buying auction property - you don't have to. The auction property that did sell went for way below the guide price. Financial institutions have held people to ransom for far too long but if the tables are turned, and it looks as though they are beginning to, repossessions will not get the hoped for price, if they sell at all. This may deter banks from being so quick to snatch back customers homes when they are experiencing difficulties.
Many of the auction properties found at sales these days comes from repossessions that were originally buy to let properties. Buying up second homes and renting them out has been good business but rents have increased and these houses have sat empty so long that the mortgages don't get paid and the home is lost.
This whole business is causing a real accommodation shortage. Add to that the fact that every single day, foreigners are coming into the country as asylum seekers, all needing accommodation and the problem can only get worse.
That said, banks do not want to be sitting on empty properties any more than anyone else and at some point, something has to give. Cheap properties will become more accessible and banks may think twice before repossessing. It is important that while the average person can afford to, we should not be rail-roaded into bowing to pressure and do o9ur best to ride out the storm that will pass.
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Property expert Catherine Harvey looks at how sales of auction property have slipped to the point of not reaching their guide price or even selling.