TIME FOR CHANGE

The Second Auction of New Flats and Homes

The historic second auction of new flats and family houses from development projects took place on Thursday, May 27th in Prague. After the December auction the GAVLAS auction and real estate agency and the Professionals real estate agency repeated it in the spaces of Autoklub ČR.

 

56 aspirants competed for 30 properties from 13 various projects and 24 new flats and family houses found their new owners.

 

The auction

The auction itself was preceded by tours of the flats and houses on offer. About 160 potential buyers came to see the properties and almost 15,000 thousand visitors viewed the web pages over the course of the month-long advertising campaign. 56 potential buyers came to the auction and paid the auction deposit. They bid on the offered properties for approximately 4.5 hours.

 

"We are satisfied with the number of participants; there was great interest. It doesn't make sense to compare the May auction with the one in December, since that was entirely unique in the number of participants - the largest in the 20-year history of auctions in the Czech Republic.

 

A majority of the properties found their winners. The sellers accepted the winning offers in roughly half the cases, even though they often did not reach the specified reserve price," Ivo Gavlas, the owner of the GAVLAS auction agency, explained.

 

Once again the auction was held in "reserve price" mode. This means that there is a secret reserve price specified in advance and if the winning offer does not exceed it then the seller has the right to not accept it. But the auction winner can still make a price offer to the seller, who then has 5 days to decide whether it will accept the offer.

 

The auction shows the real market prices

"We encountered some comments and questions from the participants at the auction as to why they do not start right at the reserve price and why it is not made public whether this reserve price was reached or not. The explanation is simple.

 

They do not start at the reserve prices because then the very essence of a "reserve price" auction would lose its meaning. Plus the auction shows the real market prices, which could be lower than the limits set according to the seller's conceptions. And it is not stated anywhere that the developer will not sell some of the flats below the reserve price.

 

That is exactly what happened during the last auction and it happened again now. As far as the publishing of the reserve prices is concerned, well that is not done anywhere in the world. It is a purely business relation between the seller and the buyer. I will give you an example in comparison.

 

It is like during standard sales where the seller tells the other party right off what his minimum demands are. And that definitely does not happen. We also put the rule that the announcer informs the winner of the auction if he reached the reserve price in the auction rules.

 

These rules were available to all the participants and they were also posted on the auction's web page. The system of the "reserve price" mode was also widely presented in the media," Ivo Gavlas also stated.

 

The starting prices

The starting prices started at 60% of the catalogue prices and they then rose to up to 85-97% of the catalogue prices in some cases. "This confirmed that 'reserve price' auctions can work well as a sales tool. Once again it demonstrated the momentary real market price that people are willing to pay for new flats and also whether the sellers are willing to sell at such a price.

 

The result is also proof that demand is slowly growing on the real estate market," stated Tomáš Duda, the Director of the Professionals real estate agency, in assessment of the auction.

 

30 properties were on offer from 13 development company projects. The companies included, for example, Finep, Ablon, Moravská stavební and AAA realitní fond. The properties that were bid on are located throughout Prague.

 

They included, for example, Malý Háj in Štěrboholy, Britská čtvrť located in Stodůlky, VIVA Rezidence in Prague 9 and Rezidence Cholupice in Prague 4. The selection of the projects reflects the current situation on the real estate market, where there is more interest in smaller and less expensive flats.

 

Thus flats with layouts of two or three rooms with kitchenettes and sizes from 50 to 80 m2 predominated in the auction. "This trend was essentially confirmed, the greatest interest was in just such property. People competed most of all, for example, for flats in the Malý Háj, Nová Harfa and Britská čtvrť projects," Tomáš Duda added.

 

The auction itself also saw some innovations, specifically the possibility to participate in the auction over the telephone and "purchase limits". While nobody preferred the option of using the telephone, approximately 10 participants used the purchase limit.

 

"For the participants this means, in practice, that they did not have to participate physically in the auction, but they entrusted us as the bidder and set a 'purchase limit'. There they specified a price that cannot be exceeded and the bidder proceeded automatically - he could only always increase the bid by a minimum amount.

 

These options are good for everyone who cannot come in person to the auction," Ivo Gavlas added.