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Property auctions: a house price crystal ball?

Auction activity is proving to be a leading indicator of house prices. Linton Chiswick explains what you need to know before buying at auction.


Auction activity is proving to be a leading indicator of house prices. Linton Chiswick explains what you need to know before buying at auction. 

Of all the data and the indicators, the hocus and the pocus, quoted in the name of predicting residential house price movements, one of the most interesting is the Zoopla Auction Price Index. Created as a percentage of the conventional market, it’s earning its salt as a leading indicator for house price moves since retrospective application demonstrated how, at the close of 2008, it dropped to 40%, a few months before the bottom fell out of the wider market. It’s pretty much lead the main indices since.

In December 2010, it appeared to begin another sharp downward movement, from 79.6% to 73.6% in a month, backed up by a larger than usual dataset. The latest figure (74.2%) suggests this might not be a blip. A twenty-five per cent discount is a significant one.

Why should the difference between the cost of property at auction and property in a high street estate agent’s window work like a crystal ball? Because, the argument goes, the usual laws of supply-and-demand simply don’t pertain to the residential property market. Recent experience has shown how – even during profound economic uncertainty and debt and credit crises – vendors, emotionally attached to their homes and hooked on 2007 valuations, are loathe to reduce asking prices. The number of transactions can fall off a cliff but the Rightmove index, which measures asking prices, will remain surprisingly, illogically, obstinate.

Auction room reality

In the auction room, however, it’s simple. If people want houses, they bid for them.

Fathom Consulting, which prepares the data for Zoopla, interprets current movements, small as they may seem, as a sign of a potentially ‘double-digit fall in house prices through 2011’. For buyers – movers or investors – who want to pick up property now at autumn prices, factoring in a fall, it would suggest the auction rooms are a good bet.

Others think so too. Back in 2008, the property bust had extended to auctions. An Allsop auctioneer described the action at a June sale as ‘like pushing water uphill’, and the house achieved its lowest success rate since 1995. In October, Welsh estate agents Peter Alan auctioned seventy-four lots to one hundred attendees and received just three bids, during the entire auction. By July 2009, Allsop and Savills were describing ‘urgency’ on the auction floor. In early December 2010, Savills were shifting two-thirds of lots… 82 properties on a single snowy day.

What the Zoopla-Fathom data tells us is that – unlike property sold on the high street – they were being sold at what buyers thought they were worth. Overall, transactions might have halved since the market’s 2007 peak, but at the auctions turnover is down just 18%.

Do your homework

So what about buying at auction? What do you need to know?

The preparation– the due diligence – isn’t far removed from what a cautious buyer should go through before exchanging on a property bought through an agent. But the sources of information, the timeframe, and the competition are different.

The majority of fellow bidders are likely to be professional investors, and they’ll know their stuff. To arm yourself to compete, it’s worth signing up to Essential Information Group’s services. At, you’ll get national listings, all the property slated for auction in your area, with complete catalogue listings. You’ll find historical data, and will be able to identify lots that have failed to sell in the past. It’s the Rightmove – plus a bit more – of the property auction world.

Once you’ve identified suitable properties, view them carefully, at least once, and consider taking an expert along. It’s the nature of the property auction that a larger proportion of the properties will be in a poor state of repair (repossessions, for instance), so it pays to factor in an expert quote from the start, and work up to what a suitable highest bid should be from there. Don’t assume that repossessions are the best deals; they come with their own complications (not only poor condition, but sometimes even a history with the bailiffs that can be difficult to draw a line under).

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10 comments so far. Why not have your say?


Feb 09, 2011 at 12:20

Houses are like anything else - they are worth what a buyer is willing to pay. Auctions give a very good idea of the real worth of real estate as opposed to the claptrap of estate agents and vested interests.

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Paul Winson

Feb 09, 2011 at 12:23


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david michael

Feb 09, 2011 at 12:45

You said yourself, It’s the nature of the property auction that a larger proportion of the properties will be in a poor state of repair, so they're bound to go for less than an immaculate property in an estate agents window. You need to compare like with like to get a truer idea of the state of the market.

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John Lacy

Feb 09, 2011 at 13:22

Linton--if your figures are correct doesn't it prove that its worth paying a decent agent to get a better price?

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Linton Chiswick

Feb 09, 2011 at 13:32

Hi John,

If you don't mind the waiting and the uncertainty... three months to exchange, often very much longer (especially if you're pricing optimistically), the property going "stale", and all the while the market falling. I'm not saying the auction's the right way to go, I'm just saying it's not a stupid choice for some people.

Hi David,

Agreed. This, from the Fathom website: "The Fathom / Zoopla API is a time series estimate of the relative price of auctioned property. Specifically, using a database of properties sold at auction in the UK, we have compared, on a month-by-month basis, the prices achieved by properties sold at auction with an estimate of what that same property might have fetched if it had been sold through an estate agent on the conventional market. That estimate, provided by, is based on a sophisticated, proprietary algorithm." Whether that algorithm is sophisticated enough to take into account condition I don't know. I've emailed someone there a link to this page.

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Feb 09, 2011 at 15:11

I think "In the auction room, however, it’s simple. If people want houses, they bid for them." should be rewritten to be "In the auction room, however, it’s simple. If people want houses and have the money to pay for them, they bid for them." In 2008 when the prices dropped this was primarily due to a lack of credit from banks not the crystal balls of investors.

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The Astrologer

Feb 09, 2011 at 16:37

Isn't this all showing the simple truth that long term mortgage availability (35 years, 5x salary etc) really does cause artificially high asking prices in the property market? The mortgage famine is bringing properties to more sensible levels. Auctions will generally show the true worth of a house without mortgage inflated valuations.

Pre war I believe the standard mortgage period was 10 years. I'd love to have an affordable house on a 10 year mortgage. Unfortunately you can bet your life that some banks are going to go back to a stupid lending policy once funds are available because they have vested interest in rising asset values in the housing market (subject to a government bailout every 50 years!)

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Will Ton

Feb 09, 2011 at 17:39

Its not that simple.

Supply and demand are at play here.

Supply is restricted due to decades of planning restrictions.

Demand is booming due to population growth.

The price of property is determined by the cost of paying for it. That cost is very low at the moment due to low interest rates.

The price of property at auction is determined by what the buyer thinks he can make on it after the auction, either by refurb and sale or by rent, both of which are determined by the wider market.

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Julian Ford

Feb 09, 2011 at 20:14

Earlier comments missed the point I feel. The size of discount from auction room to estate agent and whether the system of valuing the property at auction is sophisticated enough to compare like with like doesn't matter greatly here. The fact that the zoopla adjusted sale price at auction dropped by 6% in a month (before stabalizing) is for me the issue, coupled with the authors insinuation that the zoopla price index is an indicator of the future direction of the wider market.

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Feb 10, 2011 at 12:28

I have bought and sold property by auction for many years, however, I have not bought anything during this recession as the prices achieved for the better arear's of London have been too high for residential properties when you factor in their poor condition. There is still a shortage of stock, therefore, bidding will be strong for the right property.

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