Towards the end of April, we were facing something of an information vacuum in the property industry. The market had come to a standstill, the SCSI and RICS were recommending the inclusion of a ‘material uncertainty’ clause in property valuations and the term ‘comparables’ was essentially a misnomer – nothing was comparable.
At BidX1, we were not facing many practical impediments to selling because our model is based around online property transactions (although the inability to hold physical viewings during the initial lockdown was a barrier to buyer engagement across the board).
With few logistical issues to contend with, the question for us was not around how to facilitate property transactions in the new environment, but whether there was even a market for such transactions. Was there sufficient depth of demand? And supply to meet it?
In other words – were we operating in a functioning property market?
Since our platform meant we could sell, the real question was – should we? How best to advise clients, who certainly do not seek the thrill of the unexpected when it comes to their assets?
Anecdotes Versus Data
There were anecdotes aplenty, but at the end of April we surveyed our active buyer database to replace these with hard data. More than 4,000 individuals responded, at which point we knew that almost 90% of them had planned to buy a property in 2020, and that over 70% were still planning to do so despite Covid-19.
This ‘sense check’ of the market was complemented by the transactional activity that was still taking place on our platform. Rather than holding large-scale auction events, we advised clients about where demand was keenest, and opened bidding on properties as and when we could ensure a strong outcome: four retail units at Quartiere Bloom on Lower Ormond Quay were sold mid-April when the commercial team set a minimum opening bid of €850,000 and let competitive bidding drive the final price up to €1,042,000.
We are fortunate to have the tools to guide strategy – our assessment of supply-demand dynamics at that point was based on data. We advised clients accordingly and launched extensive auction catalogues for June and July.
How did the market react to us launching hundreds of commercial and residential properties?
A Functioning Market
Well, if a ‘functioning market’ requires underbidders in order to demonstrate liquidity, such a market had already been re-ignited by early summer, judging by sales on the platform during those months. In June, we recorded the highest number of bidders ever registered for an online property auction. Over 750 people registered for bidding, and that sale alone raised €38m. In July, we raised over €41m – more than any other auction since September 2018.
Our platform also provides a liquidity or ‘demand measure’ – calculated by totalling the highest offer from each unsuccessful bidder. It is an important figure because it provides a concrete indicator of unspent capital, and therefore demand. In June alone, the total liquidity available was a whopping €92m. 580 underbidders walked away empty-handed.
A functioning market, indeed.
While pent-up demand played a role in those summer months, we didn’t see that demand taper off; as of this week, €200m-worth of Irish property had been sold on our platform in 2020. Liquidity – unspent cash – was €450m.
Measuring Demand
Of course, data drives success. Underbidder numbers and liquidity figures allow us to measure demand at the most granular level – by asset type and location – and then provide clients with a clear strategy for optimal outcomes. What assets will sell well at a given point in time? In what locations? And to whom?
Galway residential properties are attracting an average of 4.1 bidders per property, for example, with 82% of assets selling at auction. Commercial value-add opportunities are performing better than ever, as investors seek returns through acquisitions which offer asset management and/or development opportunities.
Has the make-up of buyers changed? Who is bringing capital to the market? This year has seen a 50% increase in the number of international investors bidding on Irish properties. If you’re selling in the current market, reaching a global investor audience is essential to maximise return.
And what to expect from 2021? Last month, I wrote a piece for this newspaper in which I argued that technology could no longer be considered simply a ‘nice to have’ for sellers when choosing an agent. If 2020 has shone a spotlight on the importance of technology for our industry, I believe 2021 will be the year that we embrace the power of data.
In our own business, the insights and information generated by our digital platform and through our buyer database have been more essential than ever, providing the data necessary to advise clients during the most uncertain of times.
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This piece originally appeared in the Business Post here. Jonathan Fenn is Director at BidX1 Ireland.
Connect with Jonathan on LinkedIn here, and keep up to date with all BidX1 updates here.