The most recent Allsop auction took place on December 15th and 17th 2009 and saw 415 lots offered for sale, a drop of 62% on the same time last year when Allsop were offering 1,100 properties for sale at auction.
This dramatic difference illustrates what is happening in the repossessed property market, which can by summarized as follows:
- Levels of repossession sales at auction peaked in Q4 of 2008 but have fallen sharply since
- Volume of residential auction sales as a proportion of all recorded sales rose from 1.2% to 4.7% in Q4 of 2008 but has since dropped back to 4.1%
- There has been a sharp fall in buy-to-let buyers, with 86% of purchasers at Allsop residential sales buying as private investors
This fall off in sales of repossessed properties can, in part, be explained by the increasing pressure placed on lenders by the government to assist owner-occupier borrowers to avoid the ultimate sanction of repossession. Increased politicisation of the largest lenders became inevitable as they merged with the Lloyds Banking Group, and ultimately became 43% state owned. And, of course, Northern Rock had already been nationalised. As is the way of the world, state owned organisations are politically driven rather than commercially motivated.
2009 Government Measures to Support those at Risk of Repossession
- £200m mortgage rescue scheme targeted at the most vulnerable households on incomes of £60,000 or less a year who are entitled to be re-housed under homelessness legislation. Eligible households apply to their local authority either to sell an equity share or the entire interest in their home to a housing association and remain in occupation at a rent.
- On January 5 2009, changes came into effect on Income Support for Mortgage Interest (ISMI), cutting from 39 to 13 weeks – the time before homeowners who lose their jobs receive financial help with the interest payments on their mortgage. This is only available to homeowners who have an outstanding mortgage of less than £200,000.
- The Homeowner Mortgage Support Scheme (introduced in April ’09) allows households which suffer an income shock to defer part of their payments for up to two years.
You could be forgiven for thinking that the foregoing means that levels of repossession are falling. You would be wrong. Although the number of repossessions forecast for 2009 has been reduced from 75,000 to 65,000, the number of repossessions recorded by the Council of Mortgage Lenders continues to rise. What has fallen dramatically is the proportion of these properties offered at auction. Experts predict, however, that 425,000 borrowers are likely to end 2009 more than three months in arrears with their mortgage repayments.
So, could we see a return to the previous trend of auction houses being the place to go looking for investment properties? It’s a case of watch this space. The next Allsop residential property auction takes place on 9th and 11th February, 2010.