reporadar.co.uk

Leading auctioneers Allsop concluded their special two day repossessions-only auction, which took place on November 12th and 13th, by achieving an average 94pc sale rate over the event. Selling 95pc of lots at The Cafe Royal on day one and 93pc of lots at The Cumberland on day two, they raised £38.85m.

At a time when estate agents are selling on average less than one property a week and when the property auction has only a 59% sale rate, Allsop have proved yet again that there are still plenty buyers for realistically priced property.

“Each day attracted large crowds and strong bidding”, said auctioneer Gary Murphy, speaking after the second day of the sale. “There was a significantly higher proportion of private buyers this time than at recent sales, particularly in the South East. Owner occupiers including first timers, hopeful second home owners and investors fought against professionals”, added Murphy.

Without the crazy lending practices, which were prevalent pre-Crunch, private and professional buyers are re-entering the market knowing exactly what they have to spend and what they want to spend it on.

However, unlike the early 90s, lenders do not appear to be willing to sell at any price.

“It is usual for repossessions to be offered in the market by private treaty in the first instance. If they fail to attract buyers after a number of months they are entered for auction. In some cases, our auction prices exceeded previous asking prices”, said Murphy.

This is encouraging news for both lenders, trying to recover monies owed, and borrowers, who might face a shortfall debt if the sale price was too low.

With recession in the UK, Europe and the US already well underway, the global deleveraging, growing distrust of all financial institutions and collapsing pound are all acting as additional motivators to put one’s money somewhere tangible.

The recent 1.5pc cut in the Base Rate and decline in 3-month LIBOR, as well as the belief of more rate cuts to come, are proving catalysts for those who still see bricks and mortar as a long-term investment.

Should the pattern set in recent months continue for 2009, it is possible that auctions may provide the basing in prices that the property market has been unable to find from the conventional estate agent approach.

The results can be found at the Allsop site, as can details of the unsold lots.

3-month Sterling LIBOR was today set at 4.49625pc, a massive 106.5 basis points lower than yesterday’s pre-cut print of 5.56125pc for the popular interbank lending rate.

The key interbank rate had been drifting lower since it peaked a month ago at 6.30pc, prior to the joint Central Bank rate cutting on October 8th. Fuelled by expectations of a 50 basis point cut yesterday, it had continued its downward trend having already started to baking in the expected Base Rate cut.

For existing borrowers, the impact of the lower LIBOR rate may still be limited. Whilst those with Base Rate or LIBOR tracker rate mortgages should see the benefit eventually, subject to the collar rules of their mortgages, the reductions in both the interbank rate and the Base Rate will mean nothing to those with fixed rates.

Those with Standard Variable Rate mortgages, estimated by the Council of Mortgage Lenders to be less than 10pc of mortgagors, will be at the mercy of their lender. Yesterday Abbey and Lloyds TSB said that they would pass on the full 1.5pc Base Rate cut to their Standard Variable Rate mortgagors.

It is for new lending where lower interbank rates are going to prove most important since it is the rate banks charge each other and, ultimately, charge consumers on their new loans and new mortgages which will influence, amongst other things, the strength of retail sales and the housing market.

However, despite the reductions in interbank rates, liquidity is unlikely to ease in the short term. In an environment of continued deleveraging, end-of-year balance sheet straightening and with a deepening recession in the UK and beyond, banks will not be falling over themselves to lend for some months yet. Even when they do, criteria will still be considerably tighter than pre-Crunch, limiting any potential upside in house prices for quite some time.

For now, mortgages are expected to remain tight. The secular bear in home ownership is expected to continue as the total number of mortgagors continues to contract. Even if Q2 2009 does see a nadir in nominal prices, and that is a big and unlikely if, growth in repossessions will continue for sometime after that. Bull trends in repossessions start before house prices peak and end several quarters after nominal prices bottom.

3-month LIBOR has today been set at 4.49625pc. Before yesterday's headline-shaking 150 basis point cut in the Base Rate 3-month LIBOR, the interbank lending rate most commonly used by banks, had been set at 5.56125pc. This means the rate is now 106.5 basis points lower than the pre-cut level yesterday.

At midday the markets were caught off-guard as the two-day meeting of the Bank of England’s Monetary Policy Committee concluded by surprising everyone with a massive 1.5 percentage point cut in the Base Rate, slashing it to just 3.0pc, the lowest level since 1955.

With recession deepening and house prices still in free fall, they are now down nearly 20% in RPI-adjusted terms since their peak last year, there will be a hope that such a spectacular cut can put a floor under the economy, although nothing can be done about the damage already inflicted by not acting sooner.

However, the key to any cut will be how fast it is passed on to the consumer. It is the cost which banks charge each other which is paramount here and that is the LIBOR rate. Having been as low as just 16bp before the Credit Crunch, recently the difference between the Base Rate and the 3-month LIBOR rate was up around 180bp. In the last couple of weeks 3-month LIBOR had fallen back to under the 120bp mark and it will be hoped that today’s decimation of the Base Rate will result in both the nominal and relative interbank rates coming down.

To put any floor under house prices, falling rates will also need to be matched by increased Loan-to-Value ratios for borrowers. Higher LTV ratios will be especially important given the needs of first-time-buyers and movers with negative equity.

It is highly unlikely that today’s shock-and-awe rate cut will lead to an immediate V-shaped bounce in house prices, but it could begin to provide a base on which prices could stabilise.

Realistically, prices need to fall another 10%-15% to encourage more buyers from the sidelines. It is important though that any continued declines in house prices are at a slowing rate. When prospective buyers notice that they will then begin to feel that a bottom is near. And that, combined with low interest rates and higher LTVs, will be what begins to get the housing market moving again.

Today’s decisive action by the MPC is hopefully the first step along that path.

The Bank of England’s Monetary Policy Committee concluded the monthly two-day meeting by surprising the market with a gargantuan 1.5 percentage point cut in the Base Rate, reducing it to 3.00% and storming through the previous multi-generational low hit in 2003 as the rate hit its lowest point in 54 years. Media and economists had been [...]

Selling 510 of the 595 lots at their recent two-day property auction on 30th October and 3rd November, Allsop Residential achieved an 86% sale rate - a 27 point, or more than 45% increase, over the current average of 59%.

Raising a total of £57.8m, Allsop have again proved that there are plenty of buyers for the right property at the right price. With the traditional estate agent approach proving an ineffective way to get a sale, auctions are taking over as the means of getting a deal done. No gazundering, no haggling, just the fall of the hammer.

“Although the seasoned traders and investors are back in search of a deal, private buyers are giving them a run for their money”, said auctioneer Gary Murphy commented speaking after the sale. “It’s apparent that non professional, cash investors recognise the emerging opportunities that auctions present. First time buyers, parents, couples, owner occupiers have all come to the room to buy at what they perceive to be attainable and sensible market levels”, Murphy concluded.

Around three-quarters of the sale comprised of distressed lots for a variety of prime and sub prime mortgagees, along with a number of properties for 14 different housing associations, two local authorities, the Highways Agency and BRB Residuary Body.

Appealing to both professional and private buyers, the sale ensured bidding delivered good deals for both sellers and those looking for a bargain. Highlights included:

Lot 46 - 30 Gunter Grove, Chelsea, London SW10. A freehold residential building of 2,560 sq ft, vacant and with potential for conversion to a family home. Sold on behalf of a property company for £880,000 to a private buyer against a guide price of £750,000 to £800,000.

Lot 158 - 7 Helen Cottages, Dedworth Road, Windsor. A vacant 3 bedroom cottage for mortgagees. Sold for £145,000.

Lot 230 - Goods Yard, Tormarton Crescent, Bristol. Offered on behalf of BRB Residuary Ltd. A freehold site let and producing £86,500 pa. Sold for £750,000.

Lot 531 - Apartment 301, Sky 1, 33-35 Simpson Street, Manchester. A third floor new build 2 bedroom flat for mortgagees. Sold for £75,000.

Allsop’s next residential sale, to be held in London on November 12th and 13th and, is a repossessions-only auction comprising some 400 lots. They are still accepting entries for their last sale of the year, to be held on December 15th and 17th December.

A list of unsold lots  or the entire results can be found on their website.

New mortgages approved for house purchase rose to 33,000 in September, a 1,000 increase on the historic low of just 32,000 achieved in August, according to figures released by the Bank of England today.

The marginal increase, the first month-on-month rise since June 2007, still leaves the number at record low levels and over two thirds down from the levels being achieved just a year ago. Figures for remortgages, also released today, showed a small improvement with the number up on August.

Whilst net mortgage lending rose £2.167 billion in September, the August number was revised down and showed a fall of £691 million in August - in other words mortgagors paid off more than they borrowed.

The contraction of mortgage credit in August continues to confirm that a Secular Bear in both Homeownership and real House Prices is under way, despite the efforts by money-pumping Central Banks to inflate away the problem by expanding the money supply. Broad money grew by 12.4% in the year to September, up from 11.5% in August, the fastest rate since January.

Eyes on Next Week

Hopes for a minimum 50 basis point cut by the Monetary Policy Committee at next week’s two-day meeting have already been reflected in currencies and the action of stockmarkets, the latter appearing to have started their counter-trend rally amidst the current bear market.

There are hopes that with interbank lending finally easing, the decline in rates between banks continued today with the 3-month dollar rate shedding another 5bp to 3.42%, any cut of the base rate by the MPC will be reflected in the rates paid by borrowers . . . be those borrowers mortgagors or other banks.

It is also likely that politicians, having used taxpayers money to nationalise banks, will look to apply pressure in the run up to Christmas. Even as recession engulfs the entire economy, and RPI-adjusted GDP continues to contract at the fastest rate for over 30 years, it would not be inconceivable for the banks new masters to urge them to advance credit in a hope to get the overindebted consumer indebting again so that retail sales look good in the New Year and tax revenues can be bolstered.

Allsop Residential have announced a special two-day auction of repossessed residential property, to take place place on the 12th and 13th November at the Cafe Royal and the Cumberland Hotel respectively.

The auction will feature 400 lots to be offered on behalf of a variety of mortgagees over the two days.

This auction is in addition to their previously scheduled two-day residential property auctions. The first, on October 30th and November 3rd, has some 500 repossessed properties listed. What is expected to be their final auction of the year, to be held in London on 15th and 17th December, is also expected to include a large number of repossessions.

This auction emphasises the rapid acceleration in the numbers of repossessed properties ending up at auction which has been taking place in recent months. According to Stephen Rose, Debt Advice Bureau director and founder of in:specie™, “Continued tightness in interbank lending and expectations of further sizable falls in property prices in 2009, particularly as the recession bites, mean cash-strapped mortgagees are looking to get what they can as fast as they can”.

Which means as long as the banks need the cash, the flow of repossessed properties to auction should continue. However, should interbank lending free up then, once the balance sheets of the lenders begin to improve, the need to sell fast will disappear. When that happens, it would be reasonable to expect lenders to be more selective about what repossessed properties they sell through auction.

Earlier today the Danish Central Bank raised the key interest rate by 50 basis points to 5.50%. In a statement the bank said: “As a result of continued intervention to support the Danish krone, Denmark’s Nationalbank increases the lending rate and the rate of interest for certificates and deposits from 5 percent to 5.5 percent”. The move [...]

The range of different mortgages available through high street lenders has plummeted to just 3,281, a three-quarters drop from the July 2007 peak of 13,000, according to Moneyfacts.co.uk.

Analysis of house price data from Nationwide Building Society shows that RPI-adjusted prices also peaked in July 2007, though the peak in nominal prices was October 2007.

The two are not disconnected.

The absence of bank-to-bank lending, the inability to securitise mortgages and the spike in interbank interest rates has both reduced mortgage choice by 75pc and resulted in numerous lenders withdrawing from the marketplace, some even going bankrupt. Those lenders left standing are only willing to lend to people with good credit and a big deposit.

Without cheap and easy credit chasing high-risk borrowers, property prices could do only one thing … Collapse. Figures from both Nationwide and Halifax show a year-on-year decline of more than 12pc. Meanwhile, the Bank of England reports that new house purchase mortgages plunged to a historic low of just 32,000 in August.

Whilst both credit and criteria remain tight the housing market has little hope of recovering. In fact, stabilisation is the best that can be hoped for and a U-shaped recession would now be considered a lucky escape compared to the L-shaped depression which is threatening to make an entrance.

This means, for those with cash or impeccable credit, cheap properties will continue to be available for the foreseeable future and, if you can find them, there are plenty of bargains still to be had.