Repossessions push houses under the hammer

The number of residential properties offered at auction rose by 32 percent in Q2 2007. The increase was pushed by repossessions, as affordability conditions deteriorated following interest rate hikes, says latest RICS (Royal Institution of Chartered Surveyors) research.

In the second quarter of 2007 there were 5,120 residential properties sold at auction, the highest number of sales in over two years and a 22 percent rise on the previous quarter. Rising interest rates in 2007 have increased the number of repossessions which have been showing up in the number of lots offered for auction. Residential lots offered at auction should continue to pick up with the RICS estimating that repossessions could rise to in excess of 45,000 in 2008, amounting to 124 repossessions per day.

The highest concentration of auction activity took place in the North West of England, where 826 properties were sold. The North West has seen the biggest quarterly pick up in repossession orders of any UK region and has also witnessed the largest number of repossession orders outside London six months prior, which may be now materialising into actual repossessions. Merseyside previously saw a particularly acute rise in growth in repossession orders during Q4 2006 rising by 60% on the previous year.

There were 1,228 commercial property lots sold at auction, an 18 percent rise on the previous quarter. The highest concentration of auction activity took place in the South West but only 49 commercial properties were sold at auction in London which saw the lowest number of properties offered for sale in a year. RICS surveys show that the retail market has rebounded in the capital which may have reduced the number of repossessed secondary properties.

RICS economist, Oliver Gilmartin, said: “With the full impact of interest rate rises in 2007 yet to filter through into higher mortgage costs we continue to expect a rise in the number of homes going under the hammer into 2008. The Auction house will continue to a quick means to foreclose mortgages where properties have been repossessed.

“Encouragingly, the annual growth rate in repossession orders has eased back in 2007 having risen quite sharply during the back end of 2006. However, RICS estimate that repossessions will continue to climb higher into 2008 and could exceed 45,000, a rise of 50 percent from current annualised rates.

“The commercial property market may also see a rise in lots offered at auction as tougher conditions return to the high street as consumers tighten their belts."