LONDON -- Property investor Amjad Raja surveyed the rows of empty seats on the second day of what was billed as the United Kingdom's biggest-ever residential-property auction.

"There's hardly anybody here," he said.

That might serve as a judgment on the U.K.'s once-booming housing market. According to surveys, May house prices fell 3.8% to 4.4% compared with the corresponding month last year.

Mr. Raja, 45 years old, and his partners snapped up three properties at the London auction, including a three-bedroom house for £54,500 ($106,134), with a value that Mr. Raja estimated at £80,000.

According to Allsop, the U.K. property-auction house that carried out the two-day event in late May and early June, the sale raised £45 million, or half the amount of its auction in May 2007.

"Given the difficulties of the residential-property market, we think we did very well," said Gary Murphy, a partner and head of the residential-auction department at Allsop.

A lack of mortgage financing in the wake of the credit crunch and a steady stream of negative headlines on the housing market have hit confidence and led to the emergence of a clear buyers' market in the U.K.'s residential-property auctions.

Mr. Murphy said he didn't expect to see the bottom of the auction market for another 12 to 18 months, and confidence wouldn't improve until there were signs of a recovery in the U.S., where falling property prices first triggered concerns about the quality of mortgage loans.

"Certainly as far as professional investors are concerned...many of our clients are hanging back, and where possible going into cash and getting ready," he said. "They're amassing some fire power ready to buy up what they perceive to be modest prices. As soon as they see the bottom they will come in."

Most Britons buy and sell properties through real-estate agents. Auctions are an alternative, particularly for vendors who need to sell quickly as a result of financial difficulties.

The big challenge facing auctioneers now is to persuade clients to set their prices at lower levels or risk a no sale.

The Essential Information Group, which collects data on U.K. property auctions, says the number of properties being auctioned is rising, but the percentage that are sold and the revenue raised is falling.

In the three months to the end of May, the number of residential lots offered at auction rose 3.6% on the year to 8,304, but the amount that actually sold fell 20% and the total cash raised dropped 35%, EIG said. Only 57% of lots that went under the hammer were sold over the three months, down from 74% in the corresponding period last year.

EIG Managing Director David Sandeman said the percentage sold is at its lowest level since the early 1990s, when high interest rates and unemployment led to a significant slump in U.K. house prices.

"We are seeing prices fall at auction," he said. "If people want to transact it's going to have to be at lower levels and this is a trend that has been going on for the last few months."

Auctioneers noted a rise in the number of lots that failed to attract the minimum bid at auction only to be bought by a canny investor driving a hard bargain in the hours and days after -- a signal that vendors haven't cut their prices enough and prices have further to fall.

"If it's a good property, right place, right price, they are selling just as easy as they were last year [at auction]," said Melfyn Williams, chairman of the U.K.'s National Association of Valuers and Auctioneers. "If it's a property that the seller has been a little bit optimistic in what they hope to achieve, they are the ones that aren't selling."

Write to Nicholas Winning at nicholas.winning@dowjones.com

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