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Boroughs 'losing £10million a year as they auction homes off too cheaply'
Katharine Barney, City Hall Reporter29.10.09
London councils are losing £10million a year by selling properties through auctions rather than estate agents, new figures show.
Cash-strapped boroughs want to get money quickly to plough back into redeveloping other, cheaper homes to ease overcrowding.
A total of 400 homes were sold at auction in the past three years, generating nearly £160million for boroughs. But experts estimate that is about £32million less than if the sales had gone through estate agents.
Charles Smailes, chairman of the National Association of Valuers and Auctioneers, said auction properties could be as much as 20 per cent cheaper than normal sales. He added that for buyers, auctions "can be the best value for money you can find so long as you do your homework properly".
Sean McMahon, an estate agent from Field & Sons, said: "Councils would get more money if they sold properties through an agent who really knows the market." Figures from auction information firm eigroup.co.uk show:
102 council lots were sold for a total of £50.2million in the year 2006/07.
93 were sold for £52.8million the following year.
205 fetched £55.8million in the year 2008/09.
Last year boroughs sold twice as many houses as three years ago but only generated £5million more - showing the impact of the price slump, and of smaller homes being sold.
The most active boroughs were Camden, Wandsworth and Lambeth. Last year alone, Lambeth - which is facing a fraud inquiry into a £22million overspend on housing budgets - sold 56 homes at an average of £135,000.
A Lambeth spokesman said the money from auctions was used to renovate other homes: "We are committed to ensuring affordable accommodation in good repair is available for those in need, and we only auction properties that are uneconomic for us to refurbish.
"A larger number have been available for auction in the last financial year because there were more properties in need of extensive refurbishment."
Wandsworth sold 88 homes over three years, making £37.8 million. Camden, where more than 18,000 people are waiting for a council house, raised £33.8million from 56 homes.
Meric Apak, chairman of the Camden Federation of Tenants and Residents Associations, said: "Tenants are saying it is immoral with so many people on the waiting list. Selling council houses in the open market when we have already paid for them in years of rent is nothing more than back-door privatisation."
The surge in auctions could be due to a restructuring of local government finance. Councils can now keep all the money from house sales, instead of having to give a slice to the Government's Housing Revenue Account.
The Local Government Information Unit has identified more than 50,000 overcrowded households in London. In Tower Hamlets more than 60 per cent of children are living in overcrowded homes.
Flat developers make killing
Lambeth council came under fire in February after a two-bedroom flat was sold at auction for about £30,000 less than similar properties.
It was bought by a consortium of developers for £128,000 with the intention of selling it on at a profit. The flat, in Cricklade Avenue, Streatham Hill, needed little more than a new kitchen and bathroom, with refurbishment costs estimated in the region of £10,000.
Six months later it has gone on the market with a local estate agent for £215,000, potentially making the seller a profit of about £80,000.
It is now under offer at the asking price. Jack Frankel, part of the consortium which regularly buys at auctions, said: “I realised pretty quickly that this was a bargain and I'm very pleased with the way this has gone.
“Lambeth council has one of the largest housing stocks, so it makes sense that they have one of the biggest portfolios to buy from.”
Reader views (2)
The drawback with using estate agents is that, at least in my experience, that property can take longer to sell. I believe I'm right in saying that if you buy a property at auction you have to complete the sale within a month, and occasionally it's an even shorter time.
- Judith, KIng's Lynn, Norfolk, UK
Why would we expect anything less, we all know how, incompetent, inneficient, and unnacountable these councils are.
It's not their money is it, so they don't care.
Everthing they touch is tainted professionaly, the reason most of them work at the town hall, is no one else would have them.
To think a flat went for £128K to a greedy property developer, they could have at least sold it at the same price to a local person in need of a home.
Shame on these people, the Sharon Shoesmiths of housing and finance, an utter disgrace to the comunity they are supposed to serve.
- P Staker, London
