The Covid-19 Boom and Bust: Lessons for Property Auction Buyers
    Published 2 days ago

    The Covid-19 Boom and Bust: Lessons for Property Auction Buyers

    For many, the Covid-19 pandemic was a time of upheaval. Yet, for countless property investors, it felt like an unprecedented opportunity. A mix of Rishi Sunak’s stamp duty holiday, the work-from-home revolution, and historically low interest rates created a cocktail of incentives that led to a frenzied rush to buy properties. Auction rooms, were now virtual or livestream, buzzed with activity as investors seized the chance to expand their portfolios or secure dream homes outside of the city as gardens and office space were in high demand.

    However, like all parties, this one has come to an end. In 2025, those who benefited from ultra-low interest rates and tax breaks are bracing for the financial hangover, particularly investors who took advantage of five-year fixed-rate mortgage deals during the height of the boom.

    A Pandemic Property Frenzy

    On July 8, 2020, with the housing market frozen since the initial lockdown, Chancellor Sunak announced a stamp duty holiday, raising the threshold to £500,000. This slashed up to £15,000 off transaction costs for high-value purchases and reignited a market that had been dormant for months.

    In the world of property auctions, this policy provided fertile ground for bidders looking to snap up deals. Paired with rock-bottom mortgage rates averaging just 1.98% for a five-year fix, the market transformed into a playground for buyers. From London flats to countryside cottages, bidders fought over opportunities to secure properties at prices they felt were too good to miss.

    A house model placed on top of financial documents and charts, symbolising property investment and financial planning

    Facing the Financial Reality

    But the music has stopped. According to Hamptons, 744,673 borrowers on five-year fixed-rate deals from 2020 will face starkly higher repayments as those deals expire this year. With average five-year fixed rates now at 4.31%, investors could see their monthly mortgage payments increase by £237.15 on average. For properties purchased through auctions, where larger loans are often required, the impact may be even greater.

    For example, in London, where auction properties typically command higher prices, borrowers face an average increase of £462 per month, a rise from £1,600 to £2,062. In the southeast, the additional monthly cost averages £337.(Hamptons 2025 https://www.hamptons.co.uk)

    This looming financial burden has left many unprepared. A survey by Censuswide 2025 https://censuswide.com found that nearly half of borrowers would struggle with a £300 monthly increase, leaving some to consider selling their investments.

    Opportunities Amid the Challenges

    For property auction buyers, 2025 isn’t all doom and gloom. Those who secured short-term deals or are actively managing their portfolios may find opportunities to renegotiate or adapt. Borrowers with two-year fixes that ended in 2023 when further two year loans were taken out, may see slight reductions in rates, easing some pressure. Additionally, as the “race for space” slows and demand for rural properties declines, savvy auction bidders could find opportunities to acquire assets at more reasonable prices.

    Strategic Advice for Auction Investors

    1. Plan Ahead: If your fixed rate is expiring on some of your investment properties, work with a lenders to explore your options three to six months in advance. Product transfers or new deals may save you thousands over the long term.
    2. Reassess Your Portfolio: Auction properties purchased during the Covid frenzy may require revaluation. Consider selling underperforming assets or converting properties to generate higher yields.
    3. Adapt Your Strategy: With shifting market dynamics, properties like terraced homes and flats, which are currently appreciating faster than larger houses, might offer better investment returns. Also research areas of the country with low value stock in towns across the UK that are currently undergoing regeneration programmes.
    4. Keep Cash Flow in Check: Rising rates make it crucial to maintain healthy cash reserves to manage increased monthly costs.

    Lessons for the Future

    The pandemic-era housing boom underscores the cyclical nature of the property market. While buyers benefited from short-term gains, the long-term costs of rushed decisions are now becoming clear. For property auction investors, the key takeaway is to balance ambition with caution—ensuring you are prepared to weather financial storms without compromising your investment strategy.

    With proper planning and a strategic approach, auction buyers can navigate the challenges of 2025 and continue to find value in a market ripe with opportunity. View or current listings of our February Auction here https://auctionhouselondon.co.uk/current-auction

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