Would you spend millions of pounds on a property on the other side of the world that you may not even have seen in person? A growing number of investors are doing exactly that. The international market for luxury property is well established, but in recent years, the number of such homes sold at auction, often to overseas buyers who haven’t conducted a viewing, has increased rapidly.
“Buying luxury property at auction is becoming more commonplace,” says Chad Roffers, CEO of Concierge Auctions, a marketplace run by Sotheby’s, the international auction house that has a significant real estate business. “Buyers appreciate the opportunity and transparency that luxury auctions bring.”
Real estate firm Knight Frank, which each year publishes The Wealth Report, says 44% of family offices worldwide are now looking to increase their exposure to property (that follows a fall in investment volumes since the peak of the market in 2021). Data from Christie’s shows a similar trend. A recent survey conducted by the firm found 74% of US real estate agents expect demand for luxury property to increase this year, with 58% of their counterparts in Europe and Asia saying the same.
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Luxury property markets popular with international investors include both bustling cities and idyllic holiday destinations. In the US, New York vies with Los Angeles for prestige sales, while in Europe, buyers focus on London, Rome and Paris. Dubai, Singapore and Cape Town are also magnets for the wealthy. For those seeking sun, sea and sand, Caribbean properties remain hugely in demand, while Malta is a relatively new European hotspot, boosted by citizenship schemes that enable wealthy investors to establish residency in the European Union.
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How to buy luxury property through an auction
Buying through an auction has advantages. It’s a quick and open process, with all offers visible to everyone and no need for protracted negotiations with sellers or agents. There’s also the potential to secure the property at an attractive price. Both buyers and sellers like that it’s much harder for either side to pull out after a sale is agreed. Buyers are expected to put down deposits, with sellers on the hook for legal fees and other penalties if they change their minds. “[Naming] your price as a buyer has universal appeal,” says Roffers. “We are also seeing an uptick in sellers and their listing agents coming to us because of the value they too place on transparency, as well as a time-certain sale.”
Many luxury property auctions are still conducted in the traditional way, taking place in an auction house with buyers bidding in person. But online auctions are increasingly frequent too. Either way, the auction house will put together a comprehensive package of materials to support buyers – photography and videos, for example, alongside basic due diligence material. It will also set expectations for starting bids and an estimate of the likely sale value.
“Our auctions feel like a traditional sale, but also a bit like bidding on a site such as eBay,” says Ian Allen, regional sales director at real estate firm Hamptons, which launched online auctions a year ago. “Buyers tend to wait until the closing stages of the sale to make their offers, but the clock resets each time a new offer comes in to give other buyers the chance to respond.”
Some buyers may visit the property in advance of the auction, but many won’t. And if you’re bidding on a property thousands of miles away, a viewing may not be practical. “Approximately 35% to 50% of our properties are purchased sight unseen, depending on the market, which is not uncommon in the industry,” says Concierge Auctions’ Roffers.
But “buyers must do their due diligence,” warns Paddy Pritchard-Gordon, director of buying agency Prime Purchase. “Look at the background of these properties – why are they for sale? Have a survey done as some properties, even luxury ones, can be in really bad order if they haven’t been lived in for a few years… Don’t forget to check the title and any other information that is available.”
The other critical consideration is finance. Buyers will need to have funding in place for their purchase, with a deposit of 10% often payable immediately after the auction concludes. And there may not be time to start a mortgage application.
“Speed is of the essence,” says Amadeus Wilson, director of auction finance specialist SPF Short Term Finance. “Get everything lined up beforehand and have a decision in principle in place. This will also help prevent you from over-bidding as you will know how much you can afford to spend.”
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