Published FT April 22 2011

On Friday April 15, crowds gathered at the Shelbourne hotel in Dublin for an auction of 84 lots of property that were being sold by the banks via a number of receivers.

The auction was a joint venture between Allsop, the UK’s leading residential auction house, and Space, a Dublin-based property consultancy. The room booked for the occasion, with a seating capacity of 350 and standing room of 500, was overflowing an hour before the auction began. Potential bidders were forced to line up outside on the pavement. Extra spectator seats were provided in the local pub, Doheny & Nesbitt, which was given a live TV feed from inside the auction room.

Intense interest was fuelled by the uncertain state of the Irish property market which could be compared to Schrodinger’s cat, trapped in a sealed box with a poison gas gun and a radioactive trigger and held in the questionable quantum position of being maybe alive or maybe dead until the box is opened. In Ireland, with plummeting property prices and very low turnover, no one has wanted to open the box and see for certain whether the housing market was alive or dead. “Prices in Dublin are estimated to have fallen around 50 per cent since the height of the market in 2007, with similar falls in the country,” says Robert Ganly of Knight Frank. “Speculation in development land had led to high prices which had spiralled through to houses.”

Figures from plot a 4 per cent drop in asking prices in the first quarter of 2011. They calculate the average price for a home is €302,000 in Dublin, down from €356,000 a year ago. (Nationally, the figures are €260,000, down from €301,000.) Annette Hughes from DKM Economic Consultants points to further falls to come. “Weak employment figures, falls in income, increases in the cost of living, and difficulties in accessing credit are all dampening activity levels in the market,” she says.

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However, unlike the UK with its published land registry sales figures, Ireland doesn’t have a register of achieved sales. It has been hard even for industry insiders to be certain what has been happening, especially when transaction numbers have been low. Private sellers have been clinging to high, historic and over-optimistic asking prices. Institutional sellers have been nervous about determining the real values of property.

“The banks and receivers have been holding on to property and renting it out, but recognised that it was time to move things along,” explains Stephen McCarthy of property consultancy, Space. “When the receivers divest themselves of property, they have a duty to be transparent and competitive.”

Following a series of meetings with the banks, it was decided that a property auction was the way forward and Allsop, the UK auction house, was called in to assist.

“This is the first time a multi-lot property auction sale has been held in Ireland,” says Gary Murphy of Allsop. Typically, property auctions have been held in pubs by local estate agents, with small or single lot sales. This time, 84 lots went on sale, with, unusually, not a guide price but a published maximum reserve price. These reserve prices were typically discounted 60-70 per cent from peak property prices. Most of the lots were unsold stock from developers who had gone into receivership.

Prior to Friday’s auction, the novelty factor had generated huge media interest and a hope that the stagnating market could be made to flow again. “We had phone calls from all over the world. I’ve always felt that there was a huge interest in property in Ireland and that there were a number of cash-rich buyers sitting on the sidelines,” says McCarthy.

With more than 1,000 downloads of the auction brochure and 1,600 viewings of the 50 per cent of property that was available to view prior to the auction, it was expected to be a packed room at the hotel on the day, but there was still surprise at the estimated 1,200-strong crowd. Hasty arrangements were made to gather bidders outside the hotel with bids being relayed to the auction room telephone desk via walkie-talkies. The auction was also suspended for a short while when the Irish police, the Garda, were called in to control the crowd outside who were spilling out into the road and preventing traffic from getting round the square.

With two lots withdrawn and three selling after the auction, 81 of the 82 lots were sold – a total of almost €15m of sales for the banks. Speaking immediately after his five-hour stint as auctioneer, Gary Murphy said: “That was one of the best auctions I have ever done. The fact that we are heading for almost 100 per cent success is unbelievable. The auction was conducted with a great deal of good nature, patience and charm from the bidders, and to shift that amount of property in this market in an afternoon is remarkable.”

Among the most dramatic sales was Lot 1, a 500 sq ft leasehold studio apartment in the trendy and sought-after Temple Bar district of Dublin. At the height of the boom, it would have sold for €200,000. Its reserve price at the auction was €80,000, and it sold for €126,000.

The total amount achieved at the auction was more than 20 per cent higher than the total of the pre-sales maximum reserve prices. Residential properties achieved an 8-to-10 per cent yield, and commercial properties a 9-to-11 per cent yield. A rule of thumb consensus calculates that distressed auction prices are approximately 20 per cent lower than the private treaty sales.

Other industry professionals thought that it was “a good result overall”. “It’s clearing the market of a lot of dead wood – hard-to-sell properties in poor locations,” says Knight Frank’s Robert Ganly.

Angela Keenan of, who attended the auction, says that it was good to experience a feel-good factor around property again. “It sets a new floor in pricing in the areas where property was sold and gives potential first-time buyers a good guide to the value of properties.”

“I’m encouraged and relieved that if you offer property at the right level, there are buyers. I’m also pleased at the level of interest from foreign buyers,” adds Stephen McCarthy of Space.

Allsop and Space are already booking the next auction, on July 7. They are planning for over 200 lots and anticipate more banks will want to be involved in the sale.

Copyright Financial Times 2011

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