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Life After Lockdown

12th May 2020

We for one are gearing up to do some more business when the lockdown period is over.

Properties in general will not be selling at the ‘retail’ prices which could have been obtained prior to lockdown.

This should mean only those who are serious to sell will be placing their properties on the market.

Therefore, by default there is an argument to say those who put their properties on the market will be those who have to sell.  Otherwise why would somebody put their property on the market, when it is in a dampened state?

This is particularly true of those which have been entered into auction, especially considering an auction house will not generally take on properties which do not have sensible reserve prices, given the current market conditions.

An unsold lot affects the sales rate of the auctioneer, and so makes it more difficult to attract new lots for the next auction.  Current auctions are the score board which attracts future entries.

The vendors are not necessarily individuals, they could belong to an institution who require more liquidity to be shown on their accounts, especially given the recent sluggishness in the economy.

We are looking at a lot which has failed to sell in auction once, and we are hoping it will fail again, which means the vendor will be more inclined and justified in accepting a low ball offer.

Due to the lockdown auctions have now all gone online.  In order to bid online one needs to register, and for most auctioneers in order to register you need to deposit funds.  Previously, all one had to do was rock up to an auction and raise your hand.  This added layer of compliance is likely to reduce the number of bidders.  Certainly, this would mean retail buyers are less likely to come in on the scene.

The more hoops you place in the way, the harder it becomes to attract interest and therefore buyers.

One could argue any serious buyer would have no issues in agreeing to some basic money laundering checks, and placing a deposit; you only need one right person to purchase the property.  You don’t need interest from the market.

There are strategies which we have actually executed in the auction environment, and made excellent returns with; which if used in this environment would serve the investor well.  I have covered these in previous articles but it is always good as a reminder.

One is to look for properties which are in the wrong auction; this could be for example a residential property in a predominantly commercial auction, or a property which is geographically in the wrong auction.

Another is to look for unknowns; this would scare off most buyers.  You can either do the work to turn the unknowns into knowns, or take a view and quantify the risk.

A third is to look for properties which have enforcement actions on them, again they will scare many bidders off; but a little research with advice from a planning consultant may reduce the problem to a manageable size.

Suresh Vagjiani

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