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Prices for homes sold at auction are running at about 20% below market value, according to the latest round-up of figures for homes that went under the hammer in October.
Property buyers snapped up 1,759 homes for an average £126,580 each – compared to the Land Registry’s average home price for the month of £159,999.
Sellers put 2,408 properties in 156 auctions in October, said the report from the Essential Information Group, which produces a monthly activity report.
The gap is closing between the cost of property at auction and the open market, mainly offered through estate agents.
In October 2010, the average purchase price of a home at auction was £144,651, compared with a Land Registry average of £165,118.
Although house prices generally tumbled 3.5% between October 2010 and October 2011 according to the Land Registry, prices at auction have accelerated downwards by 12.5% in the same period. The number of homes selling at auction has picked up by 16% as buyers and investors broaden their horizons to look for cheaper property away from estate agents.
“The reduction in lots offered and amounts raised in October was predominantly due to falls in the residential market, which was down by 11.3% and 9.9% respectively. However, 73% of the lots that were offered went on to sell – an increase of over 16% on October 2010,” said EI Group director David Sandeman.
“The longer term outlook shows broadly positive figures. As has been the case in the past few months, overall it is an encouraging set of results, with positive increases seen in the majority of metrics.”
Auctions are generally better for buyers who can afford to buy for cash or with a bridging loan as many banks and building societies would refuse a standard mortgage on most of the lots for sale because of non-standard construction or other defects.
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