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Housing sales through estate agents are at their lowest monthly level for 30 years, but auction houses are stocked with rising repossessions and are having a bumper January.
The start of the year is usually quiet in the property auction trade, but this month London alone is having four auctions that will put 465 lots under the hammer - 364 of them repossessions.
There were 813 repossessions sold in December, and November was an "exceptional" month, when 3,078 lots were sold, with sales 40% up on last year and repossessions accounting for more than a third.
"More and more repossessions are coming up and the auction houses are having to slot extra sales into the beginning of the year to fit them in," says David Sanderman, managing director of Essential Information Group (EIG), an analysis and listings firm. "Auctions are where the action is happening," he says.
With forecasts of 75,000 repossessions this year, against 45,000 in 2008, it's likely that this trend will continue. About a quarter of all repossessions end up in the auction room. Auctioneers are reluctant to talk about discounts, but reports of sales at 20 or even 50% below estate agents' asking prices are not uncommon.
John Wastnage, who is 29 and works for an Italian video production company, says buying at auction in the current market has given him his first opportunity to get on the property ladder. He lives with his parents, but has just bought a three-bedroom flat in Twickenham, south-west London, at auction for £141,000, 25% less than the £190,000 he might have paid a year ago.
"Until now I have been priced out of the market and I wanted to take the opportunity to buy somewhere before everyone else starts rushing back in," he says. "A lot of my friends are waiting six or 12 months to see what happens. I hope I have been able to buy today at the prices they will get then."
More than a thousand potential bidders attended the same Allsop auction at the Cumberland Hotel in London, where two-thirds of the lots were repossessions. Gary Murphy, a partner and auctioneer for the London-based firm, says many private buyers were now looking for bargains.
"This is the coalface where you can see value established. Estate agents have their heads in the sand and their prices are not value," he says. "We have new flats coming through, largely buy-to-let failures, that are fetching only half of what they were bought for."
Ed and Cynthia Nolan, property investors from Bolton in Greater Manchester, say they don't care about buy-to-let investors who have got themselves into trouble. "I don't have a lot of sympathy for those who have been greedy and over-exposed themselves. There are quite a few people around with property portfolios based on absolutely nothing who are in trouble," says Mrs Nolan, 55.
Danny Innes, 42, a chartered surveyor from London, reckons there is already evidence in the auction rooms of a recovery in prices. He points to some new-build flats in Lewisham, south-east London, that went under the hammer at £141,000, 12% more than the £127,000 they were fetching three months ago, although still well below their original £215,000 asking price.
"I think the market has only another 5% to fall. When liquidity starts to flow next year, things will improve," says Innes.
He snapped up four flats and a commercial property in Dorking, Surrey, for £525,000, some 30% below the £750,000 price that he estimates they would have fetched last year. "There is a lot more realism in the auction room. Those who thought they knew a lot about property by watching TV programmes have gone," he says.
Whether all this is good news for previous owners is another question. Last month, the Treasury select committee chairman, John McFall, accused the banks of "collective madness" in flooding the market with repossessed houses and depressing prices.
Peter Bolton King, chief executive of the National Association of Estate Agents, says some agents in the regions are frustrated that properties they have been trying to sell locally are being put into big national auctions, where they go cheap. "We have members who claim they've had sales that are almost tied up, only to find the property sold at auction for less."
As former owners remain liable for any shortfall if the property sells for less than they owe on the mortgage, they could lose out. "At such a critical time, you need to know the lender is doing its best to mitigate your losses," adds Bolton King.
Some question whether today's buyers at auction are picking up great deals. Property expert Henry Pryor reckons they need to be careful. "If you attach the word 'repossession' to a property, it has the bizarre effect of acting as an incentive,. You'll get people who assume they're getting a bargain." In fact, that's rarely the case, he says. "Just because you're paying a lot less than you would have a year ago doesn't mean you're getting it for less than it's worth."
Auctioneers say waiting for further falls could be a mistake. They are ahead of the market, the argument goes, and are already seeing prices bottoming out. "I know in my gut that some of these aren't going any lower," says Chris Coleman-Smith, head of residential auctions at Savills.
But for now the message for bargain hunters, as ever, is to proceed with caution. The prices at auction might make sense for some, but if the last few years have taught us anything, it's that there's no such thing as a safe bet.
If you plan to bid ...
• "Do your homework," says Felix Rigg, head of auctions at property consultants King Sturge. Auctioneers will expect you to have read the small print and all the legal documents. "It's not for the faint-hearted," adds buy-to-let expert David Lawrenson. It's probably best to attend a couple of auctions before bidding, he says.
• Sort out your finance. You'll need a 10% deposit on the day and generally need to complete 20 to 28 days later. There may also be a buyer's fee of £150 to £500. If you're not a cash buyer, you'll need an agreement in principle from the mortgage provider. "When the hammer comes down, these properties are sold," warns Gary Murphy of Allsop. Failure to complete because you can't get a mortgage, for instance, will mean losing the deposit.
• Be wary of property being sold out of area, says chartered surveyor Roger Ross. Much of the time, banks use London auctioneers for convenience, but sometimes property is sold out of area because it won't sell locally.
• Set a price limit and stick to it. "Just because someone else thinks it's worth the money doesn't mean it is," advises David Sanderman of EIG.
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