Jeremy Prior, Managing Director, explains: “There’s no sense pretending otherwise: there are some dark times ahead for both the UK economy and the UK property market.
“Last week the Bank of England announced a rise in interest rates of half a percentage point, the biggest increase in the cost of borrowing for 27 years. What’s more, many experts are predicting that inflation could hit 15% by the middle of next year. Plus, the UK is predicted to fall into recession later this year, with the longest downturn since 2008 expected and gross domestic product falling by as much as 2.1%. Together, this will inevitably have a significant impact on the mortgage market in particular and the housing market in general.
“But it also means that some buy-to-let landlords and investors will decide to divest themselves of part or all of their portfolio – and the most obvious route for them to do so is by auction. In fact, it might actually mean an increase in the number of sales and amount of money raised on behalf of our clients.”
However, Jeremy was keen to point out that some of these effects would take time to filter through.
He explained: “Most people have fixed mortgages, so this will be something of a slow burn. Nevertheless, a large percentage of today’s house owners have never experienced interest rates like this – even if in historical terms, they remain low, it will be financially painful for many.
“If inflation reaches 15% as predicted, the only way to get it down is to increase interest rates. Last week’s rate rise of half a percentage point is going to pale into insignificance in the next 16 months, as rates will inevitably continue to climb.
“We have already seen a slowdown in the market, with a drop in active bidders of around a third. We’re also hearing reports within the private treaty market of valuations being downgraded by lenders and deals taking much longer to complete.
“That’s not the case at auction, where both buyers and sellers appreciate the speed and certainty of the process and the deal is done on the fall of the hammer. This is evidenced by Auction House announcing an astonishing £360m (£361,848,870) of sales to the end of July with a success rate of almost 83% (82.97%).
Jeremy concludes: “This is not to suggest that there won’t be challenges ahead for the auction sector. But we do have a degree of resilience not evident elsewhere. So, despite the softening of the market, I can confidently predict that this month will be the most successful August in the 15-year history of the company.”
