Last week’s auction of distressed properties in Cork was a flop: that may be because prices outside of Dublin are still too high – and sellers may have to cut them further

LAST FRIDAY’S auction flop in Cork will undoubtedly raise questions as to whether property prices in the provinces are still overvalued.

The fact that just two of the 65 discounted lots were sold under the hammer during an excruciating three-hour session will prompt many in the property industry to examine what went wrong.

The one salutary message from the event was that buyers were not prepared to make purchases even at the maximum reserves quoted on the day. Does this mean that property values in the provinces are out of kilter with those in the greater Dublin area? Possibly.

After all, a recent report from the Central Statistics Office has shown that house prices in Dublin have fallen by almost 46 per cent from their peak in early 2007. Apartments are 53 per cent lower than at the peak. By comparison, residential properties in the rest of the country are down a mere 38 per cent.

It is difficult to pinpoint the reason for this anomaly. Perhaps it underlines yet again the madness that was the Dublin market during the boom years, when so many buyers, with the blessing of their bank managers, bid higher and higher in the belief that prices could only go one way. These guys know better now. Their bank managers are no longer to be seen and in many cases have been transferred to back-up offices in other towns.

While the owners of most of the properties offered for sale in Cork last week were probably reluctant to accept lower prices, an ever increasing number of Dublin vendors now seem prepared to bite the bullet and cut the asking price to the bone. How else could you expect to see impressive red-brick family homes going for sale all over Dublin at what looks like incredibly cheap prices?

Allsop’s successful campaign has set a floor price for other properties in Dublin. “As soon as the red flag went up, the vultures rushed in,” says one Dublin agent.

The new realism is working, according to Sherry FitzGerald, which has found buyers for close to 200 Dublin houses in May and June.

It may not be entirely fair to compare the Cork auction fiasco with last April’s Dublin auction, run by the Allsop/Space partnership, when 81 of the 82 lots sold under the hammer for € 14.8 million. For a start, Allsop – the undisputed experts in the UK for distressed sales – was handling the sales for banks and receivers who, if necessary, were prepared to take rock bottom prices. On the other hand, the Cork auctioneers were faced with the challenge of offloading privately-owned homes, sites and shops and even new houses in Urlingford, Co Kilkenny, for a local builder.

The sales programme also included a handful of island houses off Cork and Kerry and a former Convent of Mercy in Borris-in-Ossory, Co Laois. Not exactly properties you would die for. In most cases the challenge was to find a local Munster buyer because the typical Dublin investor with access to cash will now only look at prime properties in the city centre. Even Inchicore is apparently out of bounds because of its association with the disastrous Irish Glass Bottle site.

It is easy to blame the absence of bank borrowing for the poor showing in Cork but that was not an issue two months ago when Allsop/Space cleared the decks in the Shelbourne. They will attempt to do it all over again on July 7th.

Though most developers are snookered for the moment and likely to remain on the sideline for a few years, property advisers say there is any number of smaller investors ready and willing to buy secure investment properties once Nama starts calling the shots.

The overall public reaction to the first Allsop/Space auction will continue to tempt other auction houses to pitch for some of the same business. The task of staging auctions is less than challenging to most firms. However, the key to success seems to be in attracting distressed properties which must be sold on the day by financial institutions and receivers.

Sales for private clients do not have the same urgency and are unlikely to have the same success rate. Allsop undoubtedly has a special knack for handling distressed sales. They will get another opportunity next week to show their skills.

* In last Thursday’s Property Investor column, an article on rights of way stated that “to register your right of way, you need your neighbour’s consent”. This is obtained by the Land Registry. A person claiming a right of way should not approach a neighbour directly.