Homes unsold as investors lose nerve

LONDON'S auctioneers are experiencing a dramatic downturn in sales of residential property.

After a 10-year bull run, the big agents are all reporting sales significantly lower in the past month. Many of the lots are going unsold as investors take a more realistic and cautious approach.

The auction rooms are normally a good indicator of where the residential market is going and the big London agents are all reporting significantly lower sales in the past weeks. The buy-to-let market is at a virtual standstill.

In a recent auction, as many as half of the lots remained unsold with even the best sale reporting 25% of stock going begging.

Most properties auctioned are the result of repossessions by lenders after owners default on loans. Buyers are often gambling on a rapid rise in prices generally to offset the usually hefty repair bills to sell on the home in the normal marketplace at a profit.

Should prices fall even those houses with tenants - luring investors looking for income - become unattractive as it may be difficult to up the rent.

Property auctioneer Allsops says: 'We sold 75% of the residential stock in our last sale and there is no doubt at all the market is adjusting.

'There's not quite a drama yet but there are properties sensitive to the cost of money. There's no doubt there has been a lot of aspirational pricing and that is being adjusted down.'

The story is the same at Andrews and Robertson where partner John Weatherall says 65% has gone well, but 25% hasn't sold at all. 'It is something that has occurred in the last two weeks and all types of property have been affected. There's no doubt there is a slowdown,' he says.

Back in the 1980s, it was virtually impossible to arrange a mortgage on an auctioned property so it was property professionals who dominated the market. Now lenders are falling over themselves.

Peter Bill, editor of trade magazine Estates Gazette, says: 'It is not yet the rising cost of money that is slowing the market, it is the simple capital calculation and investors are asking 'What will this be worth when I want to sell in five years?' The reply just a month or two back was 'Lots more'. The worried reply today is 'Not sure, maybe a lot less.' '

Minnow among London agents is Next Move auctioneers. It sells around 30 properties a month and Peter Juster says the market has changed dramatically in the past month: 'We will not take on stuff unless it is priced realistically... and increasingly that is downward.

'The buy-to-let market has dwindled because people are no longer topping up their pensions with property because the income producers have dried up.'

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