Accelerated Auctions and Livestream Lenders
Digitalisation has drenched into the dry world of auctions like a downpour in a desert. “When COVID hit, we moved to livestream”, explains Andrew Binstock, Director and co-founder at Auction House London. What started as a workaround quickly became the standard. “It’s so convenient’, Binstock adds. “The buyers and sellers love it!”. Over 2022, figures show online auctions in the UK grew by 5.9%.
Online auction sites are fast becoming a hub for would-be buyers to daydream about lots. Or soak up ideas for the future. “I love clicking through the property auctions, and seeing the potential that’s in there”, confides Leah Brunskill, Senior Marketing Manager at MFS.
Livestream auctions have come at just the right time to sweep up the flood of new properties and attract digitally savvy first-time buyers. For bridging lenders, there are ample opportunities to scoop new business… If they can perfect their partnerships.
Sellers swamp the market
Degree by degree, things have been heating-up in the auction market for a while now. CEO of Hope Capital, Jonathan Sealey believes the trend has been rising for over a decade. “There’s no doubt interest in auction purchases is growing year on year”, he elaborates. “Ever since I set up Hope Capital back in 2011, it was clear there were many investors and developers with the auction bug”.
Today, it’s a red-hot lava volcano of activity. “The auction market is very busy at the moment”, exclaims SLD’s esteemed auctioneer Andrew Parker, who’s been slamming the hammer for thirty years. MS Lending’s Head of Sales, Adam Tauber wholeheartedly agrees, “Property auctions have soared in popularity”, he adds.
But the wave is just beginning. Broker and Principle of Finanze, Alastair Hoyne, expects “a huge amount” more homes to go under the hammer over the next year. He categorizes the sellers into three groups.
“People have either overleveraged, and can’t afford repayments”, Hoyne counts on his fingers. “Or [they purchased] an investment property and didn’t foresee […] the interest rate exceeding their rental income”.
“Or” – Honye holds three fingers in the air – “You’ve got people who just bought at the wrong time, at the peak of the market, and now they have to relocate”.
In the UK, interest rates continue to rise amid soaring inflation, driving the auction market. MFS’ Executive Director, Tiba Raja believes vendors, investors and homeowners are looking to “offload assets before the economy has a chance to worsen”. She notes how some are even “letting their properties go at a heavy discount just to exit the market”.
Auctioneer Parker also questions whether the incoming efficiency, sustainability, tax and affordability regulations could be putting landlords off. Some – purely financially motivated – owners may feel it’s “not worth the hassle”.
Sellers are attracted to auctions not simply for the speed of the sale, but also the steadiness of the buyers. “It gives both the buyer and the seller certainty”, explains Parker. In an economy that feels more like a bucking bronco, it’s a precious feeling.
Young buyer activity increases by 441%
Buyers are also craving certainty. The traditional home ownership path is out of reach for most first-timers today. Soul-destroying rents, sky-high prices and thundering interest rates steer them towards auctions. “We’ve seen confidence take a hit in the mainstream market”, agrees Raja. “There may not be much trust in the common transactional routes”.
Research from GoBankingRates reveals 60% of Gen-Zs do not believe mortgages are the best way to buy property. They are looking for cheaper and faster ways to get a foot on the ladder.
Last year, Auction House reported a titanic 441% increase in 18-24-year-olds browsing their site. Scroll through TikTok (I had to ask my 20-year-old sister for help… thank you Holly!), and you can find a series of auction-related content for Gen-Zs.
One TikTok content creator is 22-year-old Leon Kennedy, who runs Blue Buzzard Property with his father. Having bought several homes at auction already, Kennedy posts about the process. His top-performing video has 70,000 views. “People like them”, he confides. “I get a lot of messages like, ‘How do you do an auction? or, ‘How did it go?’”
Kennedy feels that most Gen-Zs are curious but get blocked by the financial side. “Most young people aren’t aware of bridging finance”, he comments. “But bridging finance is more accessible than people think”.
On bridging firms, Kennedy suggests, “perhaps they should restructure their marketing” to include younger audiences. After all, there is a hungry market eagerly lapping up auction content on social media. When asked if he’d partner up with a bridging lender on TikTok, Kennedy replied “I’d definitely be interested in that”. Lenders, you heard it here first!
Mounting demand for bridging lenders
So, how do the successful bidders pay for their properties? In Parker’s experience, “about half of all purchases are with cash”. The others will need to be financed, and that’s where bridging loans come in. Although it’s hard to judge, Binstock estimates that around 7.5% of successful bidders will use bridging finance.
The rise of inexperienced buyers has added to the demand for alternative finance. “Quite a lot of people suddenly find themselves with a completion date looming”, Binstock elaborates. As mortgages drag on, some “quickly turn to a bridging lender to fill that void”.
Sealey agrees. “Compared to traditional, long-term financing options, such as mortgages, bridging lenders are much more likely to be able to meet this timescale”, he comments.
Little by little, the demand for bridging is mounting. “Bridging loans have become a really, really popular product”, Binstock adds. On his books, broker Alastair already has £30 million worth of live bridging deals relating to auctions. Across the entire bridging industry, auction activity has “really ramped up in more recent weeks”, Raja agrees.
The race is on for livestream lenders
Livestream lending has burst the door open for opportunists. You can almost feel the whoosh of the swing and the bang against the wall as floods of newbies pile through. A “number of new lenders have entered the marketplace”, observed Binstock. “Bridging lenders I didn’t originally know of are asking us questions”.
In the first half of this year, bridging lending jumped 61% – a record high, partially because of the huge leap in auction transactions.
But despite the massive wave of new livestream lots, only a handful of lenders will be able to join the party. That’s because most auctioneers already have tightly bound partnerships with lenders. Loyalty matters and they will not recommend other bridging lenders to bidders.
Binstock can relate to this well. He reveals how new lenders are “always asking to refer them” to clients. But he maintains that it’s always a firm no. He already has an “exclusive arrangement” in place with a bridging lender, and he won’t deviate from it.
Forging strong partnerships with livestream auctions – or perhaps prominent Gen-Z TikTok influencers like Kennedy – will become increasingly essential for lenders hoping to stay buoyant in the years to come.
In this new flood of livestream auctions, there are only so many seats on the boat.
Hannah Duncan is a freelance writer with a passion for finance, sustainable investing and fintech. She loves writing engaging content for industry magazines and investment services, as well as keeping a personal blog at www.hdinvestmentcontent.com