How AI and Big Data Are Shaping UK Property Auctions

We explore the much-talked-about technology’s role in predicting auction trends, setting reserve + guide prices, finding buyers and more...

During a podcast conversation, David Sandeman – managing director of the Essential Information Group (EIG) – reminisced on his pre-internet business model of promoting auction properties via ink jet printed-out catalogues which he would make exclusively available via a mail order subscription service.

Over the following decades (and never sitting still or being unreceptive to inevitable technological changes), EIG has evolved to become the UK's leading platform for online and live-streamed auctions – with many of the industry's key players (including ourselves) white labelling their services.

Indeed, somewhat accelerated by the pandemic, buyers feel more confident than ever in "device bidding" for properties, despite not directly seeing whom they're competing against within the arguably more controlled environment of a "live" or "in the room" auction.

The property auction sector is now taking its next big leap: embracing Artificial Intelligence (AI) and Big Data.

Still in the early (yet highly promising) stages, we've put together some of the key areas currently being discussed and how they're likely to impact our industry at large...

Predicting Trends and Auction Due Diligence with "Property Big Data"

"Big" data - specifically applied to property - currently refers to massive amounts of information generated by sales trends (principally through HM Land Registry sold prices), open market sales data (through Rightmove, Zoopla, TwentyEA etc.) mortgage transactions (Nationwide, UK Finance, FCA etc.) alongside other demographic datasets such as the English Housing Survey, Open Data Communities amongst others.

With much of this information now available in the public domain (largely for free), these datasets have enabled auction buyers and sellers to make more informed and non-speculative decisions.

Yet – given the open source nature of property-related information – in the not-too-distant future, it wouldn't be unfathomable to expect much more to be available at our fingertips, facilitating better decision-making when buying and selling at auction.

These include:

• Key real-time statistics on auction sales and micro/macro trends
• Dynamic auction property valuation models and improved capture of transactional data to better identify cyclical patterns
• Easily accessible insights into environmental risks (integrating datasets to assess risks like flooding, ground stability, proximity to hazards etc.)
• Digestable comprehension of local planning laws, regulations and permissions
• Synthesised demographic data, school ratings, crime statistics and infrastructure developments providing a detailed view of the property’s positioning
• Cohesive databases of local + national rental figures, trends, arrears and voids
• Sensors, drones and IoT devices providing detailed insights into the physical condition of auction properties, buildings and land plots
• Analysis of multimedia content to detect maintenance needs and crucial issues
• Granular identification of risks related to downturns or volatility that could affect property prices in specific areas
• The ability to better navigate specific legal concerns such as leasehold issues, negative easements, restrictive covenants, incomplete works on shared land etc.
• Social media, forums and news outlet scrapers that gauge public sentiment about a neighbourhood or property type (which could influence demand)
• Analysis of historical and proposed local / national government policies and how they may affect auction buying decisions
• Detailed insights into online search patterns in the auction space
• Flagging irregularities such as auction properties repeatedly being listed or problematic lots being passed between auction houses
• Detecting incomplete information in auction legal packs, unusual Special Conditions and future mortgageability issues
• Other unstructured data pertinent to the auction industry, analysed using AI algorithms

Setting Auction Reserve and Guide Prices with AI

Setting the correct reserve and guide price is one of the most critical roles of a property auctioneer and can often make or break the success of a sale.

Using AI during the auctioneer's own appraisal process can address this key component by leveraging predictive analytics (as briefly outlined above) via historical property sales, more accessible auction sales data, previous bidding patterns for similar properties, property features (size, location, condition) and "tagged" items (using descriptions and photography, for example).

AI can then predict an optimal reserve price and balance seller expectations with market realities.?

Auction pricing models can also adjust reserve prices in real time based on market conditions and bidder interest.?For example, if pre-auction interest in a property is unusually high, the reserve price might be automatically adjusted upward to reflect demand and vice versa (subject to sellers' consent).?

These insights enable auctioneers to adjust their strategies on the fly, such as extending bidding times or offering additional incentives.

Finding Auction Buyers and AI-Powered Personalised Recommendations

Through building our auction database and managing the UK's largest property investor and developer group here on LinkedIn, Property Solvers Auctions is currently building out AI infrastructure that allows for personalised and criteria-based targeting.

AI algorithms can further segment potential buyers based on search histories and past bidding activity. This will also enable us to collaborate with other auctioneers, estate agents and property sourcers where buyers can be alerted to suitable properties appearing in upcoming auctions.

Chatbots and Virtual Assistants

AI-powered chatbots are increasingly being used to engage with auction buyers and sellers.

These tools can answer common questions, provide property details and even guide users through the bidding process in real time. Chatbots enhance the client experience and increase engagement.

At Property Solvers, our chatbot is trained by our ever-expanding content datasets that can interpret and respond to any query our visitors may have (check it out here).

The Auction Experience with AI

AI-driven innovations within the auction space look set to further improve the auction participation process.

This includes AI-powered assistants who can place bids on behalf of buyers, adhering to their pre-set limits and strategies. Buyers can then receive instant alerts about bid changes and adjust increments based on real-time demand, properties with low levels of interest and other relevant information.

Auctions in an "AI world" be able to easily detect fraudulent activity, such as fake bids or suspicious payment patterns, by analysing user behaviour and transaction data – thus ensuring a fair transactional environment for all participants

Challenges and Ethical Considerations

Although AI and big data are beneficial within the property auction sector, there are clearly challenges ahead.

AI systems are only as unbiased as the data they’re trained on. If historical data reflects systemic biases, such as the undervaluation of properties in certain neighbourhoods, AI could perpetuate these issues.

Auction houses must ensure adherence with regulations like the UK’s General Data Protection Regulation (GDPR) as well as the Common Auction Conditions and compliance requirements set out by the likes of NAEA PropertyMark. AI systems are currently not sophisticated enough to handle these specifics and the correct modelling will be a tricky task. For this reason, there is increased discussion of how combining blockchain technology could further enhance transparency and security.

Ensuring accessibility and transparency is also crucial for maintaining an inclusive market whilst removing barriers for less tech-savvy participants.

AI and Big Data in UK Property Auctions – What Can We Expect

AI and big data in property auctions are still in the early stages, but the potential to transform the industry for the better is clear.

From automated auction property valuations to collaborating with auction conveyancers to streamline the process, as an auctioneer, it's genuinely exciting to see how things will evolve. Embracing (and not fearing) these advancements will enable us to run better operations and attract more clients to sell at auction.

What's more, auction participants will have the ability to harness larger datasets and incorporate more variables into their own decision-making process – spurring a much more transparent and efficient marketplace.