Property Auctions Flooded With Buy-to-Lets

Landlords exiting the buy-to-let market are flooding property auctions with homes lived in by sitting tenants.

According to letting agents Hamptons, one in four homes going under the hammer are rentals with sitting tenants.

The firm says research points towards landlords coming to the end of cheap mortgage deals are selling rather than remortgaging and are looking for a quick way to leave the market. 

In January, data shows a record 29 per cent of all housing lots at auction in January were buy-to-let homes - and 60 per cent of these had sitting tenants

Between January 2016 and July 2022, buy-to-let homes had an average of 15 to 19 per cent share of all auction properties, but this has doubled since the summer.

Cash-rich investors swoop

Another change in the market is that houses have overtaken flats as the most popular type of home to sell.

The Hamptons’ report says: “From 2019 to 2021, flats accounted for more auction sales than houses, representing 58 per cent of sales in 2019 and 51 per cent in 2021. Last year, this trend reversed, and houses – which typically achieve a lower rental yield, reflecting both the market and the condition of the property – accounted for 76 per cent of properties sold by investors at auction.”

The letting agents are concerned that buy-to-let homes at auction are snapped up by cash-rich investors, skewing the market towards professional landlords with deeper pockets.

“Auctions play a small but important role in the market, accounting for around 2% of transactions. They allow homes to change hands quickly and are often used to sell properties that wouldn’t be bought by owner occupiers – often but not always those which are difficult to borrow against,” said the report.

Property auction monitor Essential Information Group (EIG) echoes the Hamptons report in the latest market analysis.

Auction sales soar

Data for January shows the number of homes going to auction was up 76 per cent compared with 12 months earlier.

Almost 600 out of 919 lots offered were sold for £66.6 million -  an average sale price of £109,773.

The latest Office for National Statistics (ONS) data stated the average UK property was worth £294,000 in December 2022.

The regions with the most homes for sale at auction are the Home Counties (1280 sales/£180.8 million and the North West (1054/£67.8 million).

East Anglia homeowners sent the fewest properties to auction, with 224 sales raising £27.2 million.

Residential auction sales January 2023

Source: EIG

Buy-to-let property auction FAQ

Can I buy a home with a sitting tenant?

Yes, property investors can buy homes with sitting tenants but sometimes need help with financing if they are not cash buyers. Many lenders prefer not to fund these deals because of the rights the tenant may have if the lender must repossess the home.

What is a sitting tenant?

A sitting tenant lives in a rented home and stays in place if the property is sold.

Must I buy cash at auction?

No, buyers can arrange mortgage funding or a bridging loan, usually with a prearranged line of credit. The risk from buying with a loan is the time the lender may take to complete the paperwork, as most auctions require buyers to complete their purchases within 28 days.

What is a bridging loan?

A bridging loan is short-term borrowing often taken by property investors to pay for the purchase and refurbishment of rental property.

How do I find a property auction?

Just search how to find a property auction online…

How significant a share of the housing market are auction sales?

Industry analysts estimate around 2.5 per cent of all UK house sales go to auction.