UK Housing Slump Gains Momentum as Properties Fail to Sell at Auction

Housing-Market / UK Housing Dec 02, 2007 - 11:15 AM GMT

Home owners failing to sell properties through the traditional estate agency route are increasingly opting for the chance of a quick sale offered by Auction houses up and down Britain.

However the number of sales being achieved at auctions has plummeted, even after worried sellers rush to accept offers prior to the auction. The resulting supply overhang will result in further sharp falls in the housing market that will accumulate over the coming year as home owners price expectations are behind the housing curve and are forced to repeatedly cut prices.

So not only are auction houses seeing properties selling for far less than just a few months ago, but the auction route no longer offers the near 97% certainty of the property being sold which existed earlier in the year.

As an example of the results from a typical northern auction house in the city of Sheffield on 6th November 07, compared with earlier auctions during the year.

Properties At Auction	Jan 07	April 07	June 07	Nov 07
% of properties Sold	79%	66%	65%	49%
% remaining unsold (failing to achieve reserves)	3%	23%	23%	27%
% Sold prior to auction	11%	4%	0%	17%
% Sold afterwards	0%	4%	6%	4%
% Withdrawn Prior to Auction	8%	4%	6%	2%
% of Total available properties Sold at auction (excluding withdrawals)	97%	76%	76%	71%

The auction results clearly illustrate the deteriorating trend in the ability of sellers to sell properties, despite cutting back on reserve prices. Back in January 2007, sellers clearly had the upper hand and could achieve prices in excess of their reserve with only 3% of properties remaining unsold at auction. The situation has now deteriorated to the point where approaching 1/3rd of properties remaining unsold, this despite sellers more eager to do a deal with buyers prior to the auction so as to ensure a sale.

If the situation has deteriorated in the auction houses to this degree then the position with estate agencies must be dire at this point in time which supports my view that the next financial crisis to hit the housing sector will be amongst the estate agencies.

As mortgages dry up from traditional sources such as Northern Rock, Alliance and Leicester, Bradford and Bingley and Paragon so will the ability of buyers to secure financing seeking to pick up potential bargains amongst panicky sellers. Throw in an anticipated 80,000 of repossessions during 2008 means a lot of supply will over hang the UK housing market by the end of 2008 ensuring that the housing bear market will persist well into 2009 despite cuts in UK interest rates and a decline in house prices during 2008.

UK Housing Market Forecast for 2008-09 - As of 22nd August 2007

UK House Prices to fall by 15% over two years, falling prices to be accompanied by cuts in UK interest rates. (22nd Aug 07),

1st May 07 - UK Housing Market Heading for a Property Crash

25th Sep 07 - UK Housing Market on Brink of Price Crash - Media Lessons from 1989!

28th Oct 07 - UK House Prices - Primary Reasons For a Sharp Fall

10th Nov 07 - Crash in UK House Prices Forecast for April 2008 As Buy to Let Investors Sell on Capital Gains Tax Change

By Nadeem Walayat
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Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 100 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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Comments

Jen 02 Dec 07, 11:18	Frightening ! Its frightening the degree to which the situation in the housing market is worsening, its only a couple of months ago when the media was reporting robust house prices!
emillily 04 Dec 07, 15:18	A Property Crash WIll Make Housing Affordable I say good on it - despite a pre-tax income of £40k and savings of £26k my partner and I have been unable to find anything that we can realistically see ourselves living in (as a young couple maybe planning a family in the next 6-7 years) - and we're based in the north. When we could have "afforded" to buy property we were in university - the market isn't crashing as much as returning itself to normal - why should the 30pluses monopolise the market?
steve 17 Jun 08, 23:11	uk housing slump I hope the market crashes, We are returning to the uk soon, from Australia,and with a strong dollor, and making good interest on our funds, are going to make a killing,You see all the greedy people, banks and estate agents seem to love to brag about how mutch money they are making for being so clever, now they are all whining when it goes belly up, so all you first time buyers out there stick together,and zip up your wallets for 12 months as the agents will talk the market down for you,as they talked it up, and they need there pay cheques, sooner or later,(go for it)
Dominic 18 Jun 08, 10:14	Housing- If you havent bought yet, you wont for a long time I bought a three bed quasi semi with a 70' back garden for less than 90k. 5x my salary and I admit I'm stretched to breaking point, but you just cant get that sort of finance at these (5.7%) sort of rates anymore, if you can get it at all. I viewed it as buy now, buy with cash, or buy halfway though the next boom in 12 years time. Since all inflation is going pretty high now, by the time I'm refinancing, 4 and a bit years nominal losses should be minor at even worst case scenarios

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