By FIONA REDDAN, Originally published in the Irish Times, Thursday 19th January 2012
WHILE THE PRIVATE treaty market is continuing to languish in the doldrums, 2012 is likely to see another wave of distressed property auctions, as receivers look to extract value and the National Asset Management Agency encourages developers to off-load their stock. Moreover, private individuals looking to offload their properties might go down the public auction route this year, rather than rely on the vagaries of the market.
Over the next 12 months, new names such as Wilsons Auctions will be hoping to repeat the success of established players such as Allsop Space, which set the standard when it began running successful auctions last year. Its four auctions reported a 92 per cent success rate, with 314 properties sold, and it is planning on continuing this level of success in 2012, with five auctions scheduled this year featuring a “broad mix” of properties each time.
According to Robert Hoban, auction director at Allsop Space, the secret of its success is down to two factors: setting the right price, “we insist they (sellers) go into the auctions with very sensible, realistic prices”; and the exposure Allsop, which is a UK outfit, has managed to generate internationally. Indeed some 12 per cent of its auction properties were sold to foreign buyers last year.
Also looking to repeat its success this year will be Galway based agency O’Donnellan Joyce, which sold 73 out of 79 houses it put up for public auction in 2011. According to managing director Colm O’Donnellan, properties for sale came from a variety of sources, including receivers, banks and estate sales, and he hopes to double the volume of properties sold in 2012, expanding its auctions to include properties west of the Shannon. He puts the firm’s success down to its previous experience in auctions, having been involved with high profile auctions during the boom.
Nama is also likely to play a key role in the distressed property market this year. While the agency has ruled out holding a public auction of properties associated with its loans, it is likely many of its 10,000 or so properties will come to the market via auction in an indirect way in 2012.
According to a spokesman for Nama, it may “encourage” developers to sell their stock by holding auctions under their own name, or by rolling their properties into existing auctions.
This year may also see an increase in private individuals looking to offload their non-distressed properties at auction. Hoban says he is receiving a “huge amount of calls” from interested individuals, and notes the “vast majority” of properties sold at auction last year were previously available on the private treaty market but didn’t sell.
However, key to this will be sellers who are prepared to accept the low advised minimum values (AMVs) required for auctions.
But while supply might be out there, will demand hold up in 2012?
“There is a massive appetite for below market value properties, both inside and outside of Ireland,” says buyers agent Carol Tallon, author of the Irish Property Buyers Handbook 2012, noting that September’s auction marked the first time a first-time buyer (FTB) with mortgage approval bought at auction. However, this remains an exception, with buyers typically buying with cash.
“The practicality is that an auction by its nature allows a three-four week lead in. That time frame means that getting approved for finance before an auction isn’t the easiest,” notes Robert Ganly, head of residential and country with Knight Frank. According to O’Donnellan, about 60-70 per cent of purchasers at his firm’s auctions have been cash buyers, with a similar rate recorded at the Allsop Space auctions.
In the absence of the much-vaunted property register, auctions are providing some needed price transparency.
“The key thing is the fact that they’re allowing the open market to set the sale price,” notes Hoban, adding, “we’re allowing the market to find its own level.”
But are the prices being achieved truly indicative of the wider market? After all, some property experts suggest that not all banks are willing to accept the prices that receivers have achieved through sales at last year’s auction. For example, Bank of Scotland intends to exit the Irish market. So it may instruct its receivers differently to the domestic banks, who have a long-term commitment to the Irish market, and who may have a preference for taking longer to work through their distressed properties.
It is this that is probably acting as a dampener on other property auctions and curtailing other local agencies from getting involved. Last year for example, Savills had planned to stage “Ireland ’s biggest ever property auction” in the autumn, but it was postponed. According to the company, it currently has “no formal plans” to hold the event in 2012.
Similarly, last year Knight Frank also considered holding a group auction, but has no plans yet for 2012.
“We are looking at all options at the moment. If we had a group of properties that are priced realistically we would consider it,” says Ganly. In the meantime, it will go ahead with its other auctions as normal, with a sale of land in Enfield, Co Meath, scheduled for early February.
Nonetheless, there will be some new names in the group public auctions market next year – no surprise given the levels of inactivity in the overall property market. Indeed according to O’Donnellan, auctions now account for the biggest part of his firm’s business. They will be hoping for a better result than some of the much publicised less successful auctions last year – in Donegal for example, agent Easy Let held an auction at which just one of 40 properties sold.
Wilsons Auctions, which is known more for auctioning cars and office furniture, is set to bring a distressed land and property auction to Dublin.
It has had some success in this market in both Northern Ireland and Scotland, and according to Rebecca Wilson, head of corporate services with the company, it will set the date for the auction in early 2012. She expects between 40 and 60 properties to be up for sale on the day, noting the event has support from the company’s clients, including insolvency practitioners and finance houses.
It will be hoping for a better result than Merlin Property. The company, which has also made its name in car auctions, held an auction for privately owned properties last November. However, it only managed to sell two out of the 10 properties listed. It will hold its next auction in March.
Gunne will also be back in action in 2012. According to Marian MacQuillan, it has plans for between six and eight auctions this year, including a number of regional auctions covering the north east of the country.
But while investors might be keen to pick up a well-priced property, there is another side to rock-bottom sales, as protests at several auctions last year demonstrated.
While in Galway, O’Donnellan reported no protests at his firm’s auctions, in Dublin, the Allsop Space events in the Shelbourne Hotel attracted some protesters.
Pointing out that directly repossessed houses weren’t being sold at the auctions, with three quarters of properties for sale coming from receivers, Hoban says the protests were aimed at the Government.
In any case, the protests evidently did not put off buyers but if the domestic government-supported banks start to move on their distressed property portfolios this year, it is likely that protests at auctions may increase.
Where : The Shelbourne Hotel, Dublin
When : March 1st
Where : Galway
When : February 24th
Where : Burlington Hotel, Dublin
When : March 20th
Real Estate Alliance
Where : TBC
When : Spring (date TBC)
Where : TBC
When : March (date TBC)
Where : Citywest, Dublin
When : Date TBC