The rise of online – property auctions and COVID-19

Auctions have always been a popular way of buying a property in the UK. Whether it be residential, commercial, or picking up good value buy-to-let properties. For investors and landlords, it is a great opportunity to buy, renovate, refurbish then sell.

Of course, since the pandemic hit, auction houses have remained closed. Their doors, however, have now opened out onto a new platform, online. This has ignited new interest for residential and commercial buyers alike. This new demand means that the need for fast and flexible auction loans is also on an upward streak.

Why the sudden rise in interest?

There are a number of reasons for this:

  • Virtual viewings
  • Real-time, online bidding
  • Available downloads for the necessary papers

Everything is now managed remotely. So, it’s no wonder why the attendee numbers are increasing! There are plenty of advantages when buying at auction, that don’t just apply to buying online.

One in particular, is that the buyer isn’t at risk of being gazumped. Meaning that another buyer isn’t able to make a separate offer. So, once it’s sold, it’s sold.

The stamp duty holiday has caused a recent surge of property sales across the UK. As the average value of property at auctions rests under the £500,000 bracket, it’s no wonder why the amount of people looking for an auction bargain have increased.

Back in June, we released a blog piece looking at the creative way in which auction houses responded to the lockdown.

“Although an initial dip in auction sales was seen by Allsop between February and April 2020 (26%), The transition to online auctions has been positive. In April, Savills recorded £18.5 million worth of property sales at auction, and £27 million of sales in May. Based on these results, we are likely to see more firms offering online auctions in the coming months, if they haven’t already.

Prices are also rising at auction. There are currently less properties available at auction, 65% less than a year ago according to Savills, which is having a knock-on effect on the sale prices of the stock available. The average purchase price has increased by almost 40% in this time. The challenge for buyers at auction is potentially having to find finance quickly, for a slightly higher price than they may have been expecting.

Auctions and the ‘new normal’

It’s good to see we were right. Both Savills and Allsop have seen increases over July, so maybe online auctions could be the new normal?

  • Savills total for July’s online auctions came to £32,428,500, selling 82% of the available lots. This has been the highest total raised for Savills since lockdown began at the end of March. But it has been slowly rising over the last couple of months.
  • Allsop’s also received their largest total since lockdown in both commercial and residential auctions. Commercial properties for auctioned raised £52,902,000, whilst residential came in at £46,409,901.

Since lockdown has lifted, there appears to be more properties available at online auctions, rising from 196 properties in May, to 257 properties in July. This could be due to the relaxed restrictions that are currently in place, as we transition out of lockdown. People are becoming more confident in the market, as the demand for property is back on the rise.

As noted in our last auction blog, the increase in amount buyers were willing to invest into a property had increased by 40%. The average spend on a property has also risen, according to Allsop past auctions. Ignoring properties that were withdrawn or still available, between auctions in May and July, there was an increase in the average spend of just over £33,000.

August Allsop auction stats

It is clear that auction houses can be quietly confident that the demand for property will continue to grow over the upcoming months.

Why use short-term loans for auctions

In this uncertain environment, mortgage providers are in some cases taking even longer to deploy loans. The average completion now takes between 30 and 45 days, from enquiry to completion. There is also the chance of loans that have been agreed to in principle being rescinded. This means brokers and buyers must be aware of all the financial options they can use. And of course, they must know the rates and fees that apply to each of these options.

To purchase a property at auction, buyers need to react quickly as the purchase often needs to be completed within 28 days.

To meet these deadlines, buyers need to have access to fast moving form of finance. Traditional mortgages may take too long. Even a slight delay on the loan could put them at risk of losing their deposit, and the transaction falling through.

This is where we come in with fast bridging loans.

Our bridging loans are commonly used to support transactions at auction. We offer a short-term form of finance that can be deployed straight away, to give you the peace of mind that you can continue with your purchase.

We specialise in auction loans and can have your funds released in as little as three days. They can be used for residential or commercial finance, leaving your property investment options open.

As a leading bridging lender, we are here to guide you through, so if you’re new to auctions, don’t panic. To give you a helping hand, we will soon be releasing a new guide on auctions. It’ll provide helpful tips for when you come to buying a property at auction. The guide will also serve as an update to our 2019 report on auction finance, which is still available to download online.

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