Recent new-build flats are seeing their prices slashed in auction rooms with average reductions the highest seen in five years.

The average reduction on new build properties sold at auction during 2010 was just under fifty per cent according to The Essential Information Group (EIG), which provides comprehensive statistics on the auction sector.

Research by EIG compared auction property sale prices with Land Registry sale prices and discovered the average reduction has doubled since 2006.

Scott Hendry, New Business Manager at national lender Auction Finance Limited said not enough investors are taking advantage of this: “People often associate auctions with older properties and have never considered them a place to buy a new build. This is a shame because auction rooms are where you will find former new builds at ridiculously low prices.

“The average reductions being found at auctions is increasing. We’re seeing new build flats in particular sell for less than half of their original asking price. The savvy investors are catching on to the fact that auction rooms are offering the best deals, and are a good choice in the booming rental market.” In 2010 the residential sector saw a 5.2 per cent increase in lots offered at auction compared with the year before.

“We’ve seen good reductions in the past on flats but at the moment we’re noticing greater discounts than ever before and the latest stats back this up. I’ve seen flats worth £150,000 go for £40,000. Many investors I know will only buy flats and apartments as they know they are a wise choice from a yield point of view.

“As with all property purchases; you’ve got to weigh everything up. Just because you see a former new build on the market at auction it doesn’t mean it’s automatically going to be worth snapping up – always do your research. Check out the area and achievable yields.”

David Sandeman, Managing Director of EIG added: “Our subscribers are seeing clear value in the lots they are buying at auction, with repossessed new builds continuing to offer great opportunities for high yielding investments.

“In addition with the average yield of lots let out on an assured shorthold tenancy basis being north of 8.5 per cent, there is clear daylight between the cost of finance and the income, giving both rent profit and the prospect of capital growth.”

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