Auction Action: The Future Of UK Property Transactions
The UK property market has undergone enormous changes in recent times. Evolving consumer preferences and new technologies have led to shifts in the way properties are marketed, viewed and exchanged. Amidst this backdrop, the role of auctions in facilitating transactions has grown significantly.
This article will explore the promising future of the UK property auction sector and how it is likely to shape the wider housing market.
The Rising Prominence of Auctions
Auctions have long been utilised in the UK for specialist sales of distressed or high-value properties. However, wider adoption across the residential and commercial property sector has been occurring. Research indicates over £4 billion worth of property sold via auction in 2020 alone. Auctioneers report that today only around 20% of their lots are repossessions, with the vast majority being private treaty or investment sales.
Several factors are driving this change:
- Digital Disruption – New technologies have made auctions faster, more transparent and accessible to broader audiences. Live-streamed and online bidding opens auctions to remote participation.
- Faster Exchanges – Auctions can facilitate significantly quicker sales, with the average timeframe from listing to completion around 8 weeks. This satisfies consumer desire for pace and certainty.
- Motivated Buyers – Auctions attract committed investors, landlords, developers etc. with finance in place. This satisfies sellers’ desire for buyers who will complete deals smoothly.
- Certainty of Sale – The binding exchange of contracts on the fall of the hammer provides confidence for both buyers and sellers that transactions will be finalised.
- Fixed Timescales – Defined auction timetables applying pressure equally to all parties focusing minds and resources.
As these benefits become clearer, auctions are breaking out of niche status into the mainstream. The future for the sector looks bright.
Evolving Auction Models
A key driver of growth is innovation in auction platforms and models:
- Online Auctions – Digital auctions allow remote bidding and greater accessibility. Some auctioneers now run online sales exclusively. Over 50% of lots sold via one major platform in 2020 were purchased online.
- Hybrid Auctions – Many auctioneers run hybrid events with in-room and simultaneous online bidding. This blends tradition with technological convenience.
- Multi-Lot Auctions – Grouping properties into portfolios appeals to investors looking to purchase multiple assets in a single transaction.
- Land Auctions – Specialist land auctions enable developers to bid on sites packaged into lots with planning permission already secured, streamlining the development process.
- Commercial Auctions – Auctions are now commonly used to sell commercial assets like offices, retail units, hotels etc. This brings speed and transparency to commercial transactions.
- Joint Venture Auctions – Developers partner with auctioneers to sell new-build projects off-plan, enabling buyers to purchase at pre-construction discounted prices.
This innovation and diversification of auction models allow a growing proportion of property business to be conducted via the auction method of sale.
Future Forecasts for Volume and Value
Industry research indicates that strong growth in the auction sector is forecast:
- The total value of UK property sold at auction could reach £8 billion by 2025, doubling from current levels.
- The volume of lots listed may rise by around 50% over the next 5 years. Approximately 150,000 properties could sell annually compared to 100,000 today.
- By 2028, 1 in 4 properties coming to the open market could be sold via auction rather than traditional methods.
Driving this growth is rising demand from both the supply and purchasing side:
- More sellers are utilising auctions, attracted by speed, buyer profiles, and transparency.
- More buyers – both amateur and professional – are embracing auctions as transparency improves and barriers to entry reduce.
As mainstream adoption continues, auctions will cement themselves as a primary channel enabling efficient property transactions.
Impact on the Wider Housing Market
The growth of auctions is having profound effects on the wider UK property ecosystem:
- Increased Liquidity – Auctions allow assets to be sold quickly and efficiently. By unlocking ‘stale stock’, liquidity improves across the housing market.
- Smoother Transactions – Binding contracts remove risks like gazumping and speed up completions. This makes the home moving process simpler.
- Spotlight on Legal Work – With exchange happening instantly, thorough legal preparations are essential. This has led to legal firms upgrading resources and performance.
- Mortgage Market Innovation – Some lenders now offer tailored auction finance products. Criteria like post-auction survey clauses are increasingly common. This enables more auction buyers to obtain mortgages.
- Improved Price Discovery – Auction price transparency aids more accurate property valuations across the market. This benefits buyers, sellers, conveyancers and surveyors.
- Professionalisation of Buyers – Amateur buyers are increasingly using professionals for sourcing, conveyancing etc. This drives higher standards and service levels.
As these impacts demonstrate, the growth of auctions has positive knock-on effects across the property transaction lifecycle.
While the future seems bright, consolidation and maturation of the auction sector will not occur without overcoming some challenges:
- Fragmented Sector – The UK auction industry remains highly fragmented, with over 300 registered auctioneer firms. Consolidation into larger brands would boost consumer confidence and professionalism.
- Perception Issues – Auctions are still primarily associated with forced sales of distressed or low-value stock. Dispelling these outdated perceptions about inventory quality and purchaser profiles will be key.
- Online Fraud Risks – Digital auctions increase opportunities for fraud, cybercrime, and money laundering. Auctioneers will need to implement robust identity verification and payment systems.
- Service Standards – As auctions go mainstream, maintaining skilled staff, customer service and satisfaction levels across expanding portfolios will require training and investment.
- Seller Reluctance – Despite advantages, some private sellers still distrust the auction process. Improved advisory services and transparency will help overcome reservations.
While work remains, the auction industry has already demonstrated agility in responding to evolving consumer needs. As technology unlocks further innovation, auctions are on an upward trajectory at the heart of the UK property market.
In summary, auctions are transitioning from a niche sector to a primary mainstream channel for property transactions. Driven by technology, evolving buyer-seller demands, and the many efficiencies of the auction model, strong growth in the value and volume of lots sold is predicted over the next decade. As adoption expands, auctions will positively impact the functioning of the wider housing market. However, work remains to tackle challenges like fragmentation, fraud risks and negative perceptions. Overall, the bold, dynamic and transparent nature of the auction process positions it as an increasingly integral part of the future of UK property transactions.