25 September 2009
It has been reported recently that the prices at which properties are going at auction now are around 30 percent lower than the market value of the property, which industry officials have said is a gap that has trebled over the past few months.
Experts have said that the widening gap between property values on the open market and the dip in auction prices could suggest that property prices may fall again over the coming months despite slight increases in value over recent months.
Just three months ago the gap between the open market value and the auction price of a property was around 10 percent according to reports, but over the past few months this gap has trebled to 30 percent. The findings were reported by economists at Fathom Consulting, who have monitored auction prices falling over recent months.
It has been suggested that this could be down to buyers at auction demanding larger discounts in case property prices fall again, or because auction prices are not increasing in line with the open market. It has also been suggested that auction prices tend to respond more quickly to market conditions and demand, and that this widening gap be therefore be a sign of things to come.
A senior official from the group stated: ‘This reading provides a clear contrary signal to the nascent recovery in house prices evident in the more conventional house price measures. We would expect auction prices to react more quickly to changing market conditions than conventional measures, which suggest we may see prices falling again in the coming months.’
Another official added: ‘The past few months have seen the sales rate in the low 70’s, just a few points off the long term average and all the signs are that this is set to continue.’
Tags: house auctions, property values