Property investor activity could cause further reduction in supply of available properties

Increasing numbers of distressed sales to investment buyers could lead to a further reduction in an already depleted supply of UK property for sale to ordinary home buyers. The popularity of property auctions, which sell mainly to investors and speculators who buy low to make profits, has risen in recent months.

Robin King, movewithus founding director, claims that auctions are tailored to investment buyers due to the legally binding nature of transactions made when the hammer falls. This risks excluding private home buyers, who may have paid more for the same property.

King said: “There is a place for auctions and they do give a good indicator of the ‘copper bottom’ of the market. However, they should be used as part of a wider property sale strategy that benefits ordinary home buyers as well as property investment groups. Through white hot property, our sister company which specialises in repossession and part-exchange sales, we are selling 40% of our stock month on month without the need for auction.”

The underlying risk, King argues, is that as investors buy up this stock at low prices, existing UK housing supply problems will be exacerbated which may lead to a rapid rise in prices when mortgage lending becomes more widely available.

King explained: “The number of properties for sale in the UK is already projected to fall short of demand when the market returns - home builders have a finite stock of part-exchange properties and their new-build schedules have been drastically cut, meaning only a quarter of the 240,000 new homes targeted for in 2009 will be built. Also, ‘aspirational’ home movers, the keystone of the property market, are still not choosing to sell due to low prices, erosion of equity and job insecurity. This already limited supply of properties is being diminished further by investors and speculators.”

King continued: “During the second quarter of 2009, as lending becomes more available and ordinary home buyers are able to return to the market, this diminished supply may cause house prices to spike back up again during 2010 - 2011. I urge buyers to take advantage now while there's still properties available at low prices.”