Donna Wells, Managing Director at Envelop

September 2023 marked 28 years since the launch of AuctionWeb, a site “dedicated to bringing together buyers and sellers in an honest and open marketplace”. Two years later, a relaunch saw it become one of the most recognised brands in the world – eBay – and revolutionise the role of auctions within our everyday lives.

Technology is also supporting the digital evolution of the property auction process. This was especially apparent over the course of the pandemic, resulting in a boom in the creation and expansion of online auction houses and in the rise of properties going under the tech hammer. In addition, the modern method of auction has been adopted by a growing number of auction houses and estate agents across the UK.

The impact of the modern auction arena was evident in research from Moverly which highlighted a ‘notable’ number of vendors choosing to sell their properties at auction over the past year. The number of properties coming to auction in the UK was suggested to have risen from 13,854 lots in 2021/22 to 15,424 in 2022/23, even in the wake of demand from buyers slowly falling over the past twelve months.

Despite the average auction property price taking a slight dip of -1.8% to £190,871, a staggering £2.9 billion worth of residential property was successfully sold at auction in 2022/23. This growth in popularity has resulted in approximately 40% more property being sold at auction in 2022 compared to 2019 – and this number is continuing to rise.

While a private treaty sale takes an average of 171 days from instruction to completion, a more traditional property sale at auction can be completed in as little as 28 days. For an online property sale, this can be extended to a completion timeframe of 56 days which can certainly provide those buyers looking to secure funds with a little more time.

However, with this number coming in at a third of an ‘average’ purchase, this can still prove to be a short time frame given additional market complexity and lending restrictions which can often cause issues when arranging any funding and from a legal perspective. And with many mainstream lenders still unable, or unwilling, to accommodate such tight deadlines then short-term finance can often prove a viable and responsible solution.

As a firm who is consistently delivering this form of finance for property professionals and those looking at getting into property rental, it’s important to understand not only the limited timeframes involved in completing such transactions but also how and why such borrowers are looking at different areas to buy, based on investment returns.

The allure of auction properties lies in their diversity and uniqueness. This was highlighted in the September edition of Property Auction Insights – collated by Essential Information Group – which outlined that, from unconventional structural elements to strategic locations, several factors contribute to the higher number of properties making their way to the auction floor. Structural intricacies like non-

standard construction, susceptibility to subsidence, or being situated in flood-prone zones often push homeowners to opt for the auction route. Furthermore, roads hosting properties with proximity to key areas such as universities or hospitals – think HMOs (Houses in Multiple Occupation) and flats – tend to experience an influx of auction properties due to the high rental demand in those areas.

The report also added that socio-economic dynamics play a key role. Areas with lower income demographics and consequently lower owner-occupancy rates are more likely to see properties heading to auctions. Lease issues, especially those concerning leasehold properties with shorter terms, contribute to this phenomenon, as traditional mortgage providers are often hesitant to lend on such properties.

The surge in properties making their way to auction, particularly in the residential segment, is driven by a confluence of factors including landlords divesting, the economic realities of mortgage expirations, and an increasingly discerning buyer market. Meaning this is an increasingly complex lending arena which is placing a stronger emphasis on advisers to work closely with a specialist packaging partner to ensure the right lender is sourced quickly, the case is structured in a way that even the tightest of deadlines can be met and that a robust exit strategy is firmly in place at the end of the term.

Thankfully help is at hand.