Well-priced, good-quality stock is the key to unlocking the auction market for many leading regional auction houses as they look forward to a challenging 12 months of activity after a steady year of growth at the rostrum.
More than 16,000 lots were offered for sale in the first half of the year, up 7.8% on 2011, according to the Essential Information Group. Nearly 12,000 lots sold – the largest number recorded since the same time in 2007.
Set against wider economic challenges, leading regional auctioneers say the market is in solid health, especially in the residential sector, where sales were up 9% in H1, accounting for 82% of all auction sales.
But for many auctioneers, the commercial sector remains challenging as risk-averse investors shy away from less-than-perfect stock.
Against this backdrop, Estates Gazette asked the nation’s top 13 regional auctioneers for a snapshot of their micro-markets.
East Anglia
Auction House East Anglia: total raised year ending July 2012, £19.2m
Roger Lake: “This year has seen entry numbers slipping and buyer sentiment more restrained. Demand is healthy for good-value lots, and high success rates are still being achieved. Listings are from a broad spectrum, with public sector instructions continuing, a steady flow of distressed sales and more private sellers diverting to the auction route for the speed and certainty that it offers.
“Rural stock has increased with farm and amenity land selling particularly well. The commercial sector remains laboured, but auction is generating local buyers for properties that offer opportunities. Investments have performed strongly, with assured shorthold tenancies steady at 8% and delivering premiums over vacant equivalents. Income-generating assets are growing in popularity.
“The market remains price sensitive but attractive guides should continue to deliver results. The coming year will offer opportunities and challenges in equal measure. We are not expecting any real change in prices, but property should remain a safer and better-yielding, long-term investment than other alternatives available to individuals.
“The attitude of banks will have a big effect on the refurbishment sector – it has constrained activity in 2012, and could do so again in 2013. Overall, the East Anglia climate is set fair for another year with new buyers entering the fold. This should support seller confidence and keep lot numbers at around current levels.”
East Midlands
Graham Penny: total raised year ending July 2012, £47.9m
Graham Penny: “We finished off last year fairly strongly, and the market has maintained its momentum. We’ve seen a hardening of the market in terms of auction property. Not everything will sell at auction, but there is a certain type of property that sells particularly well, and we’ve found anything with an element of potential requiring renovation or refurbishment sells very well.
“I’m hoping for a continuation of the same in the next 12 months, but as we all know, the housing market is so economically sensitive that if we get a sudden downturn that’s beyond our control then that could have a knock-on effect.
“There is money out there to be spent. People are looking for ways to invest and concluding that property really is the only logical place to put their money.
“We have good stability of employment with several major companies, being led by Rolls-Royce, recruiting. As a result, the market is stable and is certainly doing better than other regions.
“The buy-to-let market is also strong, with investors attracted to auction because they have the chance of buying in the auction room at a more advantageous price.”
London
Allsop: total raised year ending July 2012, £314.6m
Duncan Moir: “London remains a market all on its own. We are so close to the sharp end of the market that to try to predict what’s going to happen is difficult. That said, we are likely to see an increase in volume disposals.
“Stock that’s been priced correctly has been selling well. The people who are motivated to buy real estate – the small and large private property companies – are quite often driven by the availability of borrowed money, so, with that tap being turned off there has been a decline of these buyers in the market for a while. However, there are still plenty of people who have cash resources who are motivated to be buyers at auctions.
“For this reason, we’re seeing a lot of private investors who are coming new to the market. Private investors are motivated by quality, and so tend to focus on central London. When these properties come up they are always keenly fought for, and we’re achieving yields that look broadly similar to what we were getting three or four years ago because of the degree of competition.”
North East
Pattinson: total raised year ending July 2012, £49.6m
Justin Anim: “While the economy is the way it is, auction remains a popular vehicle for people looking to achieve quick sales on their properties.
“The biggest challenge to us is vendors’ expectations. There’s still a significant gap between what sellers expect and get, and we still have some who are unrealistic about current market conditions.
“We’re getting plenty of varied stock. Because of the conditional nature of our auctions [where buyers have 28 days to exchange], we come into contact with a lot more domestic buyers and sellers.
“On the investment side, we’ve seen a return of serious property investors as opposed to the buy-to-let speculators because, at the moment, there are some very good yields to be had – up to 10% on residential property.
“Prices have been flat in the past 12 months, and will be going forward, provided interest rates stay static.
“Outside the North East’s principal cities of Newcastle, Durham and Sunderland we’re seeing downward pressure on prices. Prices have fallen in areas where unemployment is an issue.”
North West
Pugh: Total raised year ending July 2012, £61.5m
Stephen Swainson: “The auction room has again been populated by investors, traders, owner occupiers and developers who competed for the competitively priced lots. We expect our auctions to continue to grow over the next 12 months.
“As local government austerity measures start to squeeze the local authority purse, there is an inevitability that public sector sales in the market will increase over the next year.
“The insolvency sector disposals will continue to dominate. We believe that the distressed sales market will continue to grow as banks and lenders look to clear their balance sheets of bad debts, although there may be a drive by banks to apply pressure to borrowers to dispose of property directly rather than going down a costly insolvency route.
“We expect confidence to remain unchanged for the next 12 months due to issues in the economy and lending constraints. However, we believe that there will be an increase in small to medium-sized property companies into the market over the next 12 months looking at gearing purchases which match the lenders’ sensible loan-to-value.
“We continue to see good demand from private investors looking to grow their portfolios while prices are subdued, although these buyers are cash buyers and seek high returns for the risks.”
North West Home Counties
Network Auctions: Total raised year ending July 2012, £18.4m
Guy Charrison: “The auction market has continued to grow and, for Network Auctions, the North West Home Counties represented 43% of all lots offered over the past 12 months. A total of 69 lots were offered in this territory with 55 sales representing a 79.7% success rate.
“Average prices of lots sold in the North West Home Counties were actually lower than elsewhere in the UK at £127,371, but this was due to the nature of lots offered and not any economic or geographic factors. Yields were strong and varied between 5-18%.
“There was growth in the number of sales being made to local buyers as against national investors. My expectation for the next 12 months is that the market will remain fairly constant in terms of volumes. Sensibly priced lots have often exceeded expectations through competitive bidding, and ensuring sensible guides and reserves will remain the key in the year ahead.”
Scotland
SVA Property Auctions: total raised year ending July 2012, £8.6m
Shaun Vigers: “The past 12 months were broadly in line with expectations, but surprisingly, there’s still been no flood of residential repossessions.
“We are expecting more of the same over the next 12 months, with the market still polarised and more distressed commercial assets coming to the market. Banks do seem to be putting some of the insolvency firms under pressure to clear remaining assets in long-running cases. The proposal to nearly completely remove empty rates relief on Scottish commercial property – retail and offices – from April 2013 may well have a huge impact on values of vacant property and lead to more very distressed sales.
“The traditionally strong areas remain the same: Edinburgh, Aberdeen, and those areas where the housing market is relatively strong. Many properties are coming into the market from North and South Lanarkshire, Ayrshire and parts of the Highlands.
“Buyers remain canny. If an asset looks expensive, has been on the market previously or for a long time and needs a lot of finance to bring into use, they’re not interested. Smaller lots, listed buildings and opportunities where there is certain uplift remain popular, and properties fresh to market attract interest.”
South East Home Counties
Clive Emson Auctioneers: total raised year ending July 2012, £118.5m
Kevin Gilbert: “It’s been a good 12 months, but it’s been hard too. With what’s happening overseas in terms of the euro, we’re finding people are now more cautious than they were 12 months ago. But it’s a case of the right property and the right price will make money.
“Pricing is key. If a property is perceived as priced too high then buyers won’t look at it. We’ve had a few instances when we didn’t sell a property, but we lowered the reserve and the guide and it went back in a subsequent auction and made more money than we expected at the first auction. It emphasises the fact that the guide and the confidential reserve are the key to success.
“The market is going to be split. They’ll be those who have got cash, who will want their money to work very hard for them, and those that need funding will find it difficult to get it at sensible levels.
“Good-quality, fresh-to-the-market residential stock will sell well in the next 12 months. Land will always sell. Commercial property will still sell, but people will approach it more critically.”
Wales
John Francis: total raised year ending July 2012, £17.2m
Nigel Jones: “Our turnover over the past 12 months has increased by around 30% in auctions, so we’ve seen a considerable increase in the level of business. Our average prices are remaining constant and our success rate has increased as well. How long we can sustain an improvement of that order is difficult to say, but there seems to be more interest and confidence in auctions in this area.
“Our geographical area of Swansea and south-west Wales puts us in somewhat of a niche market. We don’t rely on repossessions, although we do have some, and we have a lot of receivership sales and local authority disposals, but nearly all our properties are vacant possessions.
“Hot spots include The Mumbles and The Gower, and we have a vast coastal area that we cover, so anything overlooking a beach or immediately off the beach or with sea views is hot.
“Our biggest challenge is keeping sellers’ expectations realistic and educating people who think that, because they can’t sell a property by private treaty, that selling by auction will lead to an immediate sale at the same price.”
West Midlands
CP Bigwood: total raised year ending July 2012, £45.7m
Rory Daly: “There are not many sectors of the property market that are achieving a pleasant surprise, but the auction market has exceeded our expectations in the past year.
“Pricing remains critical in the current market. We need to ensure that the properties we take on are realistically priced and, if they are, then we can expect to achieve 80% success rates.
“Our lots are very diverse, but we’re seeing more competition, which tends to deliver higher sale prices. Eighteen months ago we were selling on reserve or slightly above. What we noticed last year and more this year is that a lot of the sales are now above reserve, with some very high above the reserve.
“Vacant residential property is popular at the moment and the reason for that is that the buy-to-let market is strong. A lot of would-be owner-occupiers are going to auctions as opposed to buying by private treaty.
“In the West Midlands there are increased numbers of institutions using auctions as a vehicle to dispose of portfolios, including local authorities. We also get a lot of LPA receivership disposals and distressed property disposals. These are often perfect auction stock because they’re in need of improvement, have lots of potential and are reasonably well priced.”
Yorkshire and the Humber
Eddisons: total raised year ending July 2012, £59.5m
Tony Webber: “There’s been good activity in the investment market over the past 12 months. Despite investors being risk averse they still see property as a good investment in the North, and for the right property, are using their own cash.
“The most popular properties are small houses because they deliver a good return. If investors can get a 10% return on the rent they’ll be in high demand as there is also a plentiful supply of tenants.
“We’ve been selling a higher percentage of residential than commercial, which investors are more cautious about. There’s no question that selling prices have fallen over the past five years, especially for commercial properties, but they are now at a level the market will take.
“The biggest challenge in the investor market is the empty rates issue, which is definitely having an effect on the wider market and can mean it’s harder to sell empty shops, offices and factories.”
Northern Ireland
Wilsons: total raised year ending July 2012, £6.4m
Richard Bell: “At long last, in the past 12 months, Northern Ireland as a region has experienced an attitude reality check. There is a more measured understanding that property prices have readjusted by at least 50% in most locations since the high points of 2007. The market was driven downwards by a massive amount of property being offered for sale with a limited demand as a result of restrictive borrowing potential.
“Values are now at a level where buy-to-let investors can see value, particularly at auction, where rental values compare favourably with investment. However, while capital growth will occur, it will not be at the previous unrealistic levels.
We look forward to the next 12 months, with continued growth in sales and vendors realising that to sell effectively the auction process works well with an active, ready-to-buy audience.
“Bargains are there across the board both in urban and rural areas. It would, however, appear that rural locations have seen the greatest decline in value. Obviously location is even more important when considering commercial property investment at a difficult time for retailers and businesses.”
