Last updated 19:37, Thursday, 17 April 2008

The number of homes being sold at auctions has fallen to a three-year low as buyers become more cautious.

In for a hammering: Experts say repossessions could rise by 50 per cent this year

Just 57 per cent of properties that were put up for auction during the final three months of 2007 sold, compared with 69 per cent during the same period of 2006, according to the Royal Institution of Chartered Surveyors.

The group said 7,732 properties were auctioned during the fourth quarter, close to historically high levels. But just 4,539 of these sold, leaving 3,310 unsold – 50 per cent more than a year earlier.

RICS blamed the fall on a combination of greater uncertainty about the housing market, as well as tighter mortgage lending conditions as a result of the credit crunch.

The group also said there had been a 50 per cent jump in the number of repossessed properties that went under the hammer, as more people struggled to keep up with their mortgage repayments after last year’s interest rate rises, as well as problems remortgaging.

It warned that this trend is likely to continue and the number of homes that are repossessed could rise by 50 per cent during 2008.

RICS economist Oliver Gilmartin said: “Fears over further house price falls have taken some stimulus out of achieved sales at the auction house as specialist lending has all but evaporated.

“While lots offered at auction have stabilised, we expect a tougher year for many at the margins in 2008 as mortgage providers become more selective.

“While tightening credit conditions will be most acute for those with a poorer credit history, less generous loan amounts and the introduction of some upper limits on loan advances could equally hit the mid-tier of the market, increasing the number of properties languishing on auction property books.”

The group said the slow-down in auction sales had been particularly marked in London, where uncertainty in the financial markets, doubt about the size of City bonuses and a greater reliance on mortgage financing had seen the proportion of properties successfully sold at auction plummet from 80 per cent to 63 per cent in 2006.

The North East also saw a sharp fall, with just 39 per cent of auctioned homes selling during the final three months of the year, compared with 50 per cent a year earlier and 72 per cent in 2005.