Chubb’s renewed global property cat reinsurance program consists of three layers in excess of losses retained by the insurer on a per occurrence basis.

For losses in the US (excluding Alaska and Hawaii) for 2024, Chubb’s all natural perils and terrorism cover attaches after a $1.75 billion retention, up $650 million from the $1.1 billion retention in the 2023 program.

As well as the higher retention, the structure of the program has also changed. Last year, Chubb had a three-layer approach for the US, with reinsurance for all natural perils and terrorism attaching at $1.1 billion in losses, then spanning three layers up to $3.5 billion.

For 2024, Chubb has secured a layer of reinsurance coverage for US (excluding Alaska and Hawaii) all natural perils and terrorism attaching at $1.75 billion up to $2.85 billion, and a second layer attaching at $2.85 billion up to $4 billion of losses. So, overall, having had all natural perils and terror reinsurance from $1.1 billion to $3.5 billion last year, Chubb actually has slightly less of this coverage for 2024.

However, after a $4 billion attachment, for 2024, Chubb has secured US (excluding Alaska and Hawaii) named storm and earthquake reinsurance coverage to cover losses up to $5.7 billion.

Additionally, effective September 1st, 2023, Chubb purchased an additional layer of per occurrence coverage for named windstorms and earthquakes within Northeast states, which attaches at $3.5 billion and covers losses up to $4 billion. This additional layer sits alongside the US named storm and earthquake coverage as an additional cover for that region.

Chubb also renewed its international property catastrophe reinsurance at the April 2024 renewals, again lifting the retention but also the top of the tower.

The retention for this coverage has increased from $200 million in 2023 to $225 million for 2024, after which international (including Alaska and Hawaii) all natural perils and terrorism cover extends to $1.325 billion of losses. Above this layer sits Alaska, Hawaii, and Canada all natural perils and terrorism cover up to $2.475 billion of losses. Last year, the first layer attached at $200 million up to $1.3 billion, and the Alaska, Hawaii and Canada layer extended up to $2.45 billion of losses.

All in all, for 2024, primary insurer Chubb has more reinsurance in-force in the top-layers, although with more in losses set to be retained in the US.

Source: Reinsurance News

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(Bloomberg) — Country Garden Holdings Co.’s Chair Yang Huiyan says she is “very confident” the company can repair its balance sheet and pledged the founding family’s support for the ailing Chinese property giant.

The path to fix the balance sheet is “very clear and can be achieved,” Yang said at a monthly management meeting held Friday, according to a statement on the developer’s WeChat account. Country Garden “will strive to become a model for the quick recovery” of distressed companies, she added.

Country Garden’s debt struggles have epitomized the property crisis engulfing the country’s economy. The remarks come as China introduces new measures to put a floor under a property market that’s been roiled since the introduction of measures three years ago aimed at cutting the industry’s reliance on debt.

The developer, a poster child of China’s property crisis, defaulted in October for the first time on dollar bonds, and will face a test next week to avoid the same fate on a local note — an outcome that a regulator signaled it’s trying to avoid.

Yang said that Country Garden can maintain “positive assets” for the next ten years “as long as our inventory assets are sold normally.”

Separately, the company said in the statement that it will have three tasks over the next 12 months: ensuring delivery, operation, and credit and it expects to deliver more than 400,000 units in 2024.

Source : BNNBloomberg

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With remarkable growth across both the Emirates, real estate demonstrated substantial growth and impressive spikes in demand for both off-plan and existing properties

Revealing a sustained interest from property seekers and record transaction values for the third quarter across Dubai and Abu Dhabi, MENA’s leading property portal, Property Finder announced results from its latest Market Watch report for Q3 2023. The demand for property was found to be a preferred investment with great potential for long term value as a result of emerging trends that are reshaping the narrative for real estate in the UAE.

Record highs mark a successful quarter

According to Mo-asher Dubai’s official Sales Price and Rental Performance index launched by Dubai Land Department (DLD) in cooperation with Property Finder for Dubai, the overall quarterly Index for sales in Q3 2023 recorded 1.554 and an Index price of AED 1,429,187. The apartments quarterly sales Index recorded 1.676 and an Index price of AED 1,390,272, and the villas/townhouses quarterly sales Index recorded 1.443 and an Index price of AED 2,473,730. The Index showed growth in all categories. Year on Year (YoY), from Q3 2022 to Q3 2023, the overall Index surged from 1.383 to 1.554, indicating a 12.4% increase.

For rentals, Q3 2023 recorded 1.08 and an Index price of AED 58,036, the apartments quarterly rental Index recorded 1.104 and an Index price of AED 53,005, and the villas/townhouses quarterly rental Index recorded 0.969 and an Index price of AED 150,181. The overall rental Index stood at 1.08, indicating an improved rental environment compared to previous quarters.

Property Finder’s proprietary data further found that Dubai recorded 31,181 transactions compared to 25,400 in Q3 2022, marking a 22.76% YoY increase in the performance of ready and off-plan transactions, leading to Dubai’s highest quarterly peak in a decade.

On the other hand, according to data from the Department of Municipalities and Transport (DMT), Abu Dhabi experienced a significant surge in total sales transactions (both residential and commercial) during Q3 2023. The number of residential transactions reached a record high for a quarter, with 3,718 transactions compared to 1,569 transactions in Q3 2022, reflecting a substantial increase of 137% to represent around 92% of the total transaction and 90% of the overall value.

Off-plan properties continue to drive scope for long term growth

Both cities experienced a significant increase in the contribution of off-plan transactions in Q3 2023. Dubai’s off-plan properties made for 47.2% of the total transactions compared to 46.5% in Q3 2022, with 14,714 transactions in Q3 2023 compared to 11,809 in Q3 2022 recording around a 24.6% increase and the highest sales transaction volume for Q3 in a decade. Sales value for off-plan properties touched AED 35.71 billion transactions in Q3 2023, compared to AED 24.34 billion in Q3 2022, leading to a 46.72% increase and contributing to 36.6% of the total transaction value witnessing the highest value recorded ever for Q3.

Showing similar trends, Abu Dhabi recorded 2,954 off-plan sales transactions compared to 1,041 transactions in Q3 2022 to represent 79% of the total transactions as opposed to 66% of the total transactions in Q3 2022, showing a significant YoY surge by 184% in terms of volume and 367% increase for the same period in terms of value. The off-plan sales transaction value in Q3 2023 contributed to 87% of the total sales transactions value compared to 64% in Q3 2022 by reaching AED 12,713 billion compared to AED 2.72 billion. While the off-plan market witnessed an 184% increase compared to Q2 2023. With a strong economic framework and increased foreign confidence, Abu Dhabi’s real estate sector has been thriving with support from both the public and private sector.

Existing properties contribute to a continued positive trajectory for the sector

A spike in off-plan may have resulted in new trends within the existing property market but it continues to complement overall growth with higher values throughout. It is noteworthy that tenants changed their behavior, preferring to own a home instead of renting, driven by the surge in average market value for renting. In Dubai, existing/ready transactions in Q3 2023 presented 52.8% of the total sales transactions compared to 53.5% in Q3 2022.

Making up for 52.8% of the total transactions, existing sales witnessed a new record with 16,467 transactions compared to 13,591 in Q3 2022, to be the highest performance for a quarter ever recorded, with a YoY increase of 21.2% and 7.24% spike when compared to Q2 2023. Also hitting a record high in values touching AED 61.8 billion in comparison to AED 45.03 billion in Q3 2022, marking a remarkable increase of 37.3% to record the highest transaction value ever recorded for a quarter, and an 11.2% increase from Q2 2023.

For Abu Dhabi, existing/ready market sales registered 764 ready properties compared to 528 in Q3 2022, to represent around 21% of the total transactions compared to 34% in Q3 2022; marking a notable growth of 45% compared to Q3 2022. The existing/ready transaction value in Q3 2023 contributed to 13% of the total sales transactions value compared to 36% in Q3 2022, by reaching AED 1,873 billion, while transaction values witnessed a notable increase of 25% compared to AED 1,502 billion in Q3 2022.

More property seekers in the UAE

Dubai saw significant increases in rental contracts with a YoY increase of 11.2% by registering 156,422 contracts compared to 140,685 contracts in Q3 2022. New contracts reflected an increase of 2.63% by registering 84,766 contracts compared to 82,596 contracts in Q3 2022. Renewed contracts supported the rental market by registering 71,659 contracts to witness an increase of 23.36% compared to 58,089 contracts in Q3 2022, with a notable increase by 17% compared to 61,219 registered contracts in Q2 2023. All in all, more people were found to be looking for a home in the city, driving prospects for sustained momentum in the months to come.

Top areas to look out for

According to Property Finder’s proprietary data, Dubai Marina, Downtown Dubai, Business Bay, Palm Jumeirah, and Jumeirah Village Circle emerged as top choices for those looking to own an apartment, while Dubai Hills Estate, Palm Jumeirah, Arabian Ranches, Al Furjan, and Damac Hills were considered best places for villas.

Dubai Marina, Jumeirah Village Circle (JVC), Business Bay, Downtown Dubai, and Jumeirah Lake Towers (JLT) were preferred for apartment rentals in Q3 2023. Dubai Hills Estate, Damac Hills 2, Al Barsha, Jumeirah, and Damac Hills were the top areas among renters searching for villas.

In Abu Dhabi, Al Reem Island, Yas Island, Al Raha Beach, Saadiyat Island and Masdar City remained a focus for those who want to own an apartment for investment or residence purposes in Q3 2023. Al Raha Beach, Khalifa City, Corniche road, Al Khalidiya, Mohamed Bin Zayed City, Yas Island, Al Reef, and Saadiyat Island were preferred choices for apartment and villa rentals. Despite the global economic changes, the luxury real estate market in Saadiyat Island demonstrated impressive durability. Upscale properties persistently maintained their value, exhibiting a consistent rate of growth during the initial half of 2023.

Speaking on the outstanding progress made in Q3 2023, Cherif Sleiman, Chief Revenue Officer, Property Finder said, “We closed Q3 with an increased uptake in off-plan properties, strong investor confidence and a rising demand for ownership. Q3 2023 has only taken that success a notch higher, revealing even more opportunities to grow in the months to come. In the coming months, we remain committed to monitoring all aspects of the market trends to enable better decisions for property seekers through data backed transparency and enhanced trust across our platform.”

Source : DubaiChronicle

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Three charts that tell all about UK property

Welcome back, hope you had a good weekend. We’re talking about the UK housing market again today. I’ll warn you in advance, it’s a bit of a chart-fest — there’s a whole three of them. But hopefully you’ll find them useful.

The story so far: UK house prices have fallen a little — about 5% in nominal terms, significantly more in real (after inflation) terms — since peaking in summer last year (I’m using Nationwide data).

Given the extraordinary rise in interest rates over that period, it may seem surprising (and, for first-time buyers, frustrating) that prices have apparently remained so resilient.

However, there has been a crash in the market. Not in prices, but in transaction levels. And last month, that continued, as the latest Bank of England figures demonstrate.

The number of mortgage approvals for new home purchase dropped to just above 43,300 in September. That was down from just under 45,500 in August, and about a third lower than the same time last year.

As the chart below shows, this is not a “normal” market by any stretch of the imagination. In the period between the end of the last housing bust (around 2013) and the start of the pandemic in early 2020, mortgage approvals were running between 60,000 and 70,000 a month. So this is a seriously becalmed market.

For a different perspective on just how quiet this is, the chart below is even more striking. It shows that on a net basis, as a nation of homeowners, we actually paid more towards our mortgages than we took out in new borrowing last month. That’s highly unusual, as the chart below shows.

Even in the depths of the 2008 bust, net mortgage lending very rarely went negative and never to the extent we’ve seen this year. No wonder your local estate agent is looking stressed. (If you’re wondering what the spike up and down in 2021 was, that was a stamp duty holiday — so everyone got their deals in at the last minute, distorting the figures).

It’s All About Interest Rates

What’s going on? If you hadn’t already guessed, you’ll find it’s pretty clear when you look at this final chart. This shows that the average interest rate charged for a new mortgage reached just over 5% last month, while the average rate on outstanding debt climbed to 3.14%. Both are now at their highest levels since prior to the 2008 crash.

Now, I would expect that white line to start topping out around about now. You can get new mortgage loans at around or below 5% pretty widely today, depending on the product you opt for and the size of deposit you have. But that blue line is going to keep rising for a while yet as more and more people have to remortgage.

Note also that remortgage levels are currently near record lows — September saw the lowest number of remortgages since January 1999. However, this only captures remortgaging done with a different lender. If you stick with your current lender, the remortgage is not recorded.

Why are more people sticking with their current lenders rather than shopping around? The obvious reason is because that way they avoid being subject to new affordability checks, which in turn suggests that a surprising number of people are worried that they’d fail said checks. That does not necessarily bode well for financial resilience.

Anyway, getting back to that white line — you can see that even if it were to drop back to 4%, say, it would still be well above the average for the past decade or more. That means the pressure on the housing market and on prices will continue.

When mortgage rates rise, the amount of money a potential buyer can borrow at a given monthly mortgage payment goes down. In turn, that means the buyer’s overall budget — the amount he or she can offer to pay for a house — goes down. Sellers still want the peak price for their properties, but buyers can no longer afford to pay those peak prices.

At that point, a buyer can do one of three things. You can give up looking and decide to rent or stay in your current home. You can drop your expectations — go for a two-bedroom flat rather than a three-bedroom house, say. Or you can start making “cheeky” offers in the hope that the lack of competition will persuade a seller to drop their price.

This is exactly what’s happening right now. According to property portal Zoopla, the areas and sectors being hit hardest are those where properties are more expensive — so bigger family homes versus flats, and homes near London versus those in less expensive areas.

Meanwhile, sellers are adjusting prices slowly and reluctantly. In the absence of wider economic distress, that’s exactly what you’d expect to happen. But in the longer run, a mixture of estate agent desperation and a widening acceptance of reality is likely to keep them grinding lower. That’s assuming we don’t run into serious economic turmoil in the meantime.

In short — the housing market remains in deep freeze, but the drip, drip of rising interest rates and gently falling prices will, I suspect, result in the correction continuing, regardless of what the Bank of England does with interest rates this week.

Source : Bloomberg

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With Australia’s median property value set to hit a new peak by the end of 2023, what does that mean for where you live?

Since prices bottomed out in January, national values have increased faster than the rate of inflation.

CoreLogic research director Tim Lawless said while home values were still 1.3 per cent below the record reached in April last year, a new national record could be reached by the end of November. He noted:

• Dwelling values have already reached new record highs in Perth and Adelaide
• Brisbane looks set to reach a new record high in October, with home values currently only 0.6 per cent below their previous peak
• Hobart and Canberra have the furthest to go before staging a nominal recovery

Here’s how Australian house and unit prices are looking in each capital city for September.

Adelaide

Monthly change: 1.7 per cent increase

Adelaide median house value: $742,909

Median unit value: $464,414

The September quarter saw Adelaide recording the highest capital gain at 4.3 per cent, pipping out Brisbane and Perth.

Adelaide house prices are now up 6.3 per cent from their trough in March this year.

Brisbane

Monthly change: 1.3 per cent increase

Brisbane median house value: $848,680

Median unit value: $539,169

According to Mr Lawless, Brisbane looks set to reach a new record high in October, with home values currently only 0.6 per cent below their previous peak.

Homes in most of the Sunshine State are now more expensive than they were 12 months ago — with the exception of the Sunshine Coast and neighbouring Noosa.

Canberra

Monthly change: 0.2 per cent increase

Canberra median house value: $956,600

Median unit value: $591,952

Darwin

Monthly change: 0.1 per cent increase

Darwin median house value: $579,142

Median unit value: $382,116

Hobart

Monthly change: 0.6 per cent decrease

Hobart median house value: $702,377

Median unit value: $520,460

Looking at annual figures, Hobart dwellings have recorded a 7 per cent decline.

Mr Lawless believes Hobart has a long way to go before staging a nominal recovery.

Melbourne

Monthly change: 0.4 per cent increase

Melbourne median house value: $933,281

Median unit value: $612,585

Since Melbourne property prices bottomed out in January 2023, they have risen 4.3 per cent.

Melbourne was one of three capital cities to record an above-average number of homes on the market.

Perth

Monthly change: 1.3 per cent increase

Perth median house value: $646,777

Median unit value: $437,883

Perth was one of three capital cities to record strong September quarter figures, with house values up 3.6 per cent.

Total advertised supply in Perth is 43.8 per cent below the previous five-year average for this time of the year.

Sydney

Monthly change: 1 per cent increase

Sydney median house value: $1,381,045

Median unit value: $828,919

Sydney home values are up 10.6 per cent since bottoming out in January 2023.

The median house value in Sydney rose 1 per cent and is now just short of $1.4 million, the peak it reached in February last year. The median value of a unit in Sydney, at $829,000, is now within a few thousand dollars of its previous record.

Are property prices expected to keep rising?

Looking ahead, interest rates are near their peak, and population growth is rebounding strongly.

Together with low levels of supply, PRD chief economist Diaswati Mardiasmo believes property prices will increase further.

“Dwelling supply, especially for houses, has dwindled significantly,” Dr Mardiasmo said.

“The number of loans issued for the construction or purchase of new homes are at their lowest since the GFC in 2008. This means that the supply of new houses is very little, and unless people are happy to switch from buying a house to an apartment, the competition for houses will continue to increase, and thus their prices.

“We also have plenty of international investors coming back to the market. They have seen how resilient our property prices were throughout COVID and the 12 cash rate hikes.”

“People are feeling more confident with their financial situation as stable rates means there is less turbulence in monthly mortgage repayments, which allows them to plan their household budgets with more certainty,” she said.

“This often leads to more people entering the market. And as we know, when demand is high and supply is low, home prices often rise.”

While house prices will most likely accelerate, she believes the immediate rocket-like increase we saw during the pandemic will not eventuate.

Source : ABCNews

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The Australian property market saw new listings leap 9.4% in August, according to the latest Ray White listings report written by Ray White data analyst, William Clark.

This will be music to the ears of many property-buying hopefuls, particularly in view of July’s sauntering pace, but total listing figures are not as rosy. Recent CoreLogic data showed that while new listings rose across winter, total advertised supply levels are still well below last year, across the combined capitals.

Early start to the spring selling season

New listings tend to pick up around spring, while the winter months are typically slower.

However, with the solid uplift in new listings across August, experts have declared that the spring selling season has begun early.

New listings rose again last month

Although new listings petered out in the latter half of 2022, current trends indicate that it will be improbable that 2023 will follow suit.

Indeed, all major cities recorded growth from July, signally how strong this trend was across Australia. Notably, Melbourne and Sydney reported a significant increase in new listings.

The Agency CEO Geoff Lucas told The Property Tribune that listings across the East Coast of Australia were up 22% on last year, with solid momentum in the previous seven days.

“This is in line with our sales growth which is also up 22% on last year and we anticipate that listings growth will continue in the coming months,” he said.

New listings movements for capital cities

Listings in regional Australia followed the same pattern, having recorded the same surge in new listings. Regional Queensland remained the most dominant non-capital city market, with the Gold Coast bringing in substantial new monthly listings.

However, new listings in regional Australia were still trailing behind the low listings of 2022.

New listings movements for regional Australia

Ray White listing authorities, which refer to the point when vendors have signed a listing but the listing is still not advertised, have been essentially unchanged, as authorities did not rise in August as they did in July.

Authorities are considered a strong lead indicator for future listings, having around a week’s lead before authorities become published listings.

Listing authorities

Sydney listings

Top growth and decline suburbs

Sydney’s new listings rose by 11.6% in August 2023, and 5.4% from July last year.

Tallawong and Colebee were the best-performing suburbs in terms of new listings, with stock spiking by 275% and 233%, respectively.

Pemulwuy had the sharpest decline in stock, with an 88% year-on-year (YoY) drop.

Melbourne listings

Top growth and decline suburbs

New listings in the Victorian capital grew month-on-month (MoM) by 17.2% and 5.8% YoY. While regional listings fell YoY, listings improved compared to July’s numbers.

Travancore and Diggers Rest had a 133% and 100% boost in stock, while Box Hill South had a 58% slump.

Brisbane listings

Top growth and decline suburbs

Listings rose MoM, albeit on a lower scale than the same month last year. Listings in regional Queensland followed the same pattern.

Waterford’s stock shot up by 80%, while St Lucia witnessed a 77% reduction in listings.

Adelaide listings

Top growth and decline suburbs

Like in Brisbane, Adelaide’s stock improved MoM, but trailed behind listings the same month last year.

The top growth suburb for Adelaide was Banksia Park, where listings increased by 200%. On the flip side, the top decline suburb was Aberfoyle Park, where stock contracted by 74%.

Perth listings

Top growth and decline suburbs

While Perth’s new listings rose by 6.8% from July, they remained 3.7% under August last year. Regional listings decreased by 7.6% between May and August, and are down by 31.5% YoY.

Forrestdale was the highest-growth suburb, with a 175% increase in listings, while Midvale followed closely with a 150% surge in new stock. Meanwhile, listings in Waikiki shrank by 70%, the most considerable decline in Perth.

Hobart listings

Top growth and decline suburbs

August was an excellent month for Hobart, which saw stocks rise by 14.8%, Australia’s most significant MoM growth. Nonetheless, the new listings are still depressed by 5.8% compared to August last year.

Battery Point had the most significant rise in listings, with 75% more stock available, while Sandy Bay has 38% fewer homes to purchase.

Darwin listings

Top growth and decline suburbs

Darwin’s new listings grew by 26.5% in August but still lagged behind YoY, with a 30.7% decrease from last year.

New listings increased in the top-performing suburb, Parap, by 25%. Bakewell had the steepest decline in listings, with a 73% fall.

Canberra listings

Top growth and decline suburbs

New listings soared by 31.2% MoM and 11.5% YoY in Canberra.

Harrison led the pack with a 175% YoY jump in listings, while Mawson had the highest decrease of 64%.

Source : ThePropertyTribune

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The global value of professionally managed real estate fell by 4.1 per cent last year relative to 2021, representing a USD $600 billion year-over-year drop. Canada’s weight in those holdings likewise fell, slipping to ninth among the 37 countries MSCI tracks in its annual summary of global and regional market size.

For 2022, MSCI pegs the professionally managed real estate universe at USD $13.3 trillion. Canadian inventory contributes USD $403 billion (CAD $532 billion) to that total, down by USD $44 billion since 2021. After ranking eighth in 2021, Canada was surpassed by Hong Kong last year. Meanwhile, the United States expanded its dominance atop the chart with a USD $90 billion increase, pushing the value up to USD $5.375 trillion or 40.3 per cent of the global professionally managed market.

After the U.S., China, Japan, the United Kingdom and Germany are the next largest markets. These five collectively make up two-thirds of the global market size, while France, Australia, Hong Kong, Canada and Switzerland round out the top ten, accounting for roughly another 17 per cent of the total.

Inflation, rising interest rates and strengthening of the U.S. dollar against 34 of 36 other national currencies in the survey are all cited as reasons for the general drop in value. Just four countries — the U.S., Australia, South Korea and Ireland — registered year-over-year gains. On the flipside, the United Kingdom suffered the steepest drop in value, at USD $132 billion, and Japan, Sweden, Germany and Spain also logged greater losses than Canada.

Globally, the acquisition of investment properties fell off by nearly 20 per cent last year. The global turnover ratio, which measures transaction volume relative to market size, shrank from 10 per cent in 2021 to 8.7 per cent in 2022. Canada’s 7.7 turnover ratio was among the 22 countries falling short of the global average, while the U.S. posted a ratio of 11.7 per cent. Nevertheless, MSCI analysts theorize that the U.S. outperformance may not last into 2023.

“The decline in activity feels more intense as it comes on the back of a record 2021, when the U.S. in particular saw a surge of deals. From the second half of 2022 onward, however, we have recorded declines in deal volume of more than 50 per cent in all three global regions,” René Veerman, MSCI’s head of real assets, notes in the introduction to the report. “A slowdown of this scale inevitably impacts valuations, but whereas we have seen transactions consistently decline globally, valuations have adjusted at different speeds from country to country. The U.K. led the price adjustment, followed by continental Europe, but the U.S. and Asia Pacific, particularly, have lagged.”

Source : RemiNetwork

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More than 70% of “prime central London” properties sold so far this year have been bought entirely in cash, according to a report by estate agents Savills that fuels concerns that rich overseas buyers are snapping up properties at the expense of working Londoners.

A total of 71% of prime central London – an estate agent term for an area that stretches from Chelsea to Camden and Notting Hill to Westminster – have been bought mortgage-free in the seven months from January. That compares with about 35% for the UK as a whole.

It comes as soaring inflation has led the Bank of England to push interest rates to a 13-year high of 5%, which has in turn led banks to raise mortgage rates, making large home loans increasingly difficult to afford.

Frances McDonald, director of residential research at Savills, said: “The established prime markets most synonymous with equity rich buyers are holding up the strongest amid mortgage market turbulence.

“While London’s prime market continues to perform more strongly than expected, the most recent interest rate rises are likely to squeeze buyer budgets and increase price sensitivity, particularly in the more domestic outer prime locations where more buyers are dependent on borrowing. Sellers will need to price pragmatically to align with prevailing buyer expectations.”

The estate agency said that despite concern about the impact of interest rates in the wider housing market, “prime London residential values remained remarkably resilient”.

Prices across London’s prime markets have fallen by 1% compared with this time last year. That compares with a 3.5% fall in UK house prices overall.

Savills said this was because of “a growing divergence between cash and equity rich buyers and other groups in their ability to transact, and between the very top end of the market and lower value segments”.

Prices for the £5m-plus London prime market remain flat (-0.1%), while the £500,000-£1m market has seen some falls (-2.1%), and the under-£500,000 market has fallen further still (-2.5%).

Mayfair, Westminster and Marylebone were the most popular areas with overseas buyers looking for pied-a-terres. “International travel picked up at the start of this year, led by passengers from Asia, the Middle East and the US. While this has translated into increased demand, buyers at the top end remain discerning,” McDonald said.

More than 160 properties worth £10m or more were sold in London in the 2022-23 financial year – the most since 2016 when Brexit spooked the global super-rich from investing in the UK’s “super-prime” market.

A total of 161 such sales – or three a week – were made in the capital in the year to March, according to analysis of Land Registry data by the estate agent Knight Frank and the data provider LonRes.

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Packed into a suburban street, a puffer-jacketed crowd of people stamp their feet in the cold as they wait for the chance to bid on a home.

The air is charged with tension.

Young couples chasing the dream of ownership, retirees hoping to downsize and property investors rehearsing their strategies.

Each hoping they’ll be able to dive into the bidding frenzy about to begin and uniquely emerge victorious.

It’s a familiar scene to aspiring home owners across Australia.

But if you’ve ever felt the energy of a property auction firsthand, you may have wondered why we seem to be so attached to them here.

And whether the spectacle of a bunch of people waving their arms on a quiet street is really the best way to land a fair price.

Auction theory suggests open bidding offers high transparency

From Roman soldiers divvying up loot to the sale of ornate antiques across the world, auctions have been used for centuries to sell prized goods.

University of Technology Sydney economics professor Isa Hafalir says the theory behind property auctions is fairly simple.

While potential buyers might have a “private value” they’ve attached to the property based on research, at an open auction they are able to see the “common value”, by observing the public bids of others.

Plenty of interest during an auction often spurs people to reconsider a property’s worth.

“You think ‘OK, this house must be really good because lots of bidders are interested and increasing the prices, so therefore I should have a higher price for this’, and then you kind of re-evaluate your valuation,” Professor Hafalir says.

If the bids are stalling, buyers will probably scale down their private value of the property.

Auction theory assumes bidders are “risk neutral” in their behaviour, all attempting to pay a price that will be outstripped by the value of the home over the next few years.

“Under these assumptions … the auction is fully efficient,” he says.

“The highest-valued bidder will buy the object and they’re going to pay a fair price.”

Of course, human emotions run hot at auctions, which can lead to unexpected outcomes, including the “winner’s curse” — where the successful bidder realises too late they’ve forked out more than they should have in their scramble to win.

While auction fever can certainly lead people astray, Professor Hafalir says theoretical demonstrations have shown the open-auction format reduces the risk of a bidder ending up with buyer’s remorse, compared with a sale by negotiation.

“Most of the time, I would say that auctions are quite efficient,” he says.

Australia’s love of auctions isn’t matched in the US or the UK

Professor Hafalir has lived in both the United States and Australia and says the two countries have very different approaches to property auctions.

In Australia, properties going under the hammer are often sought-after homes across a range of prices.

“In the US market, a house being sold on the market sold by auction kind of signals that this is a foreclosure property, it’s not a good property,” Professor Hafalir says.

University of Queensland economics professor Flavio Menezes says it’s a similar story in the United Kingdom.

“[In the US and UK] real estate auctions are more commonly used for properties with unique characteristics,” he says.

“These may include properties under foreclosure that need to be sold at market value, luxury properties, or commercial properties.”

While auctions are more popular in Australia, the appetite varies considerably across different states and territories.

CoreLogic data from this year shows the ACT, Melbourne and Sydney are markets where you’re most likely to see a home going under the hammer.

It’s less common in Adelaide and Brisbane, while in Perth just 1.4 per cent of properties were taken to market via auction in the four weeks to June 25.

CoreLogic research director Tim Lawless says since 2021 there’s been a “subtle reduction” in the proportion of vendors taking their property to market via auction.

“This trend is more obvious in the less auction-centric markets such as Adelaide and Brisbane, where auctions temporarily comprised a much larger than normal portion of new listings as selling conditions heated up,” he says.

Why more auctions suggest a hot property market

Professor Menezes says Australia’s booming property prices have been the main driver behind the country’s embrace of auctions in recent decades.

“When a seller sets a fixed price for their property, it is often based on the recent history of prices for similar properties,” Professor Menezes says.

“However, in a rapidly growing market, such an approach underestimates the potential buyers’ willingness to pay, especially the highest possible valuation of a buyer. In a booming market, auctions prove to be highly advantageous for sellers.”

Professor Hafalir agrees auction trends offer some insight into where the wider property market is headed.

“In Australia, whenever the market is doing good, we see lots of auctions around and lots of success rates in terms of selling at auction,” he says.

“Whereas when the market is down, it is much less the number of houses are less and the success rate is less.

“So this kind of signals how the market is doing.”

Auction veterans say there’s an art to landing the winning bid

Cate Bakos’s job is all about riding the wave of an auction to land the winning bid.

The president of the Real Estate Buyers Agents Association of Australia says it’s not uncommon for clients from the UK or US to find the concept of an Australian auction “quite terrifying”.

She’s also seen competing bidders crumble under the pressure.

“I’ve seen people get carried away, and then immediately have buyer’s remorse and be unprepared to sign a contract,” she says.

She says careful research is the best way to protect against  a “deer in the headlights” situation at auction.

“To conduct all of your due diligence very thoroughly, and to do your pricing analysis in particular, is really important,” she says.

“Because you’ll hear cries of auction underquoting, and bad agent behaviour all around the nation, and you can eliminate that being a risk to you if you’ve done your homework thoroughly.”

For all its drama, Ms Bakos reckons the transparency of an auction to sell a home can’t be beaten.

“There’s no games being played or underhanded tactics or bluffing, because you can stand out in a public auction and see your opponents,” she says.

“It’s unlike a blind-bid situation where you might submit an offer and then find out after the event that the next-highest bid was $50,000 under yours.

“An auction gives you a chance to pip someone at the post and to pay what feels to you like a fair price.”

Source : ABCNews

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