I will have been on the rostrum for 30 years this September but, with the exception of my first auction, I think our sale on 11 June was possibly the most exciting ever – and my gavel was still on my desk.
This was a first in the UK – an auction held entirely online for the sale of 36 apartments off plan in a development on the Crossrail route at West Drayton. A year in the planning, the project aimed to create legally binding contracts on the fall of the virtual hammer for UK residential developers who traditionally aim for apartment reservations at international roadshows or weekend launches from show flats.
It was conceived from the realisation that these sales campaigns are often conducted on a first-come, first-served basis. I wondered, therefore, how we could harness the global interest in UK real estate to increase competitive tension and raise prices.
Why not invite bidders from anywhere in the world to compete in an online auction?
London’s new homes market is vast. There are currently 51,000 units under construction. In 2014, 22,700 new homes in London were sold (according to Molior), of which 70% were off plan. More than half of all large schemes were sold to overseas buyers. And despite a resurgence in domestic demand, many of these were sold at international exhibitions. No wonder London mayor Boris Johnson felt compelled to invite developers to observe his mayoral concordat and give UK buyers first choice.
But the online auction gives nobody an advantage – other than the highest bidder. It offers fairness and transparency to everyone in the world by providing a level playing field, and certainty on closing with a binding contract on the fall of the virtual hammer.
The campaign for Clearview Homes’ 36 units on the Grand Union Canal was encouragingly successful. We received more than 28,000 visitors to the auction and developer websites in the four-week marketing period leading up to the auction, of which 15% came from outside the UK.
Only those bidders who had completed the full registration process could bid. Full details of the purchaser and their solicitors were required, plus uploaded ID documents such as a passport and recent utility bill. A letter from the purchasers’ solicitor (who had to be UK-based) was required in a prescribed form verifying that identity checks had been completed. And a “bidder security” of £5,000 had to be paid to Allsop to show serious intent. If bidders made it to the virtual room, we knew they were serious.
Some 40% of the lots sold within a few hours during the auction itself – that’s sold, not reserved – and all remaining lots are now sold or under offer. Prices achieved at the auction were higher than those achieved by private treaty for the first phase of 14 units in the same scheme a few months earlier.
Have I innovated myself out of a job? Of course not. In-room auctions will continue to thrive. In the room, bidders can turn up and see their competition, meet sellers, exchange views and form opinions of the market. For those who can’t – or don’t want to – attend, the method accommodates remote interest via postal, telephone or online bidding. For sellers, the exposure to the market is still exceptional – Allsop sends its online catalogues to 220,000 voluntary mailing list subscribers worldwide.
The new homes market is a relative stranger to auctions, but the online method is a natural evolution for it, broadening the global market potential for developments at all price points and offering a viable alternative to high-street agents or international roadshows for developers who can’t afford to, or don’t want to, market in this way.
For us, the experience was fascinating. The new method needs to combine experience in auction marketing, new homes expertise and a breadth of knowledge and depth of involvement in the investor market. It isn’t about software – that’s just the vehicle for bidding. As with any good auction house, most of the effort goes into marketing and a huge amount of personal engagement with potential bidders before the auction takes place.
The property auction has so much to offer buyers and sellers – and it is about to be elevated to an exciting new level. West Drayton was just the beginning. Watch this space.
Gary Murphy is a partner at Allsop
