In recent years, there has been a shift in the profile of both buyers and lots offered in the auction room. In the past, the room has largely comprised developers and investors seeking their latest property purchase. However, today buyers come in a variety of forms – and owner-occupiers, until recently not known as prime auction buyers, now account for one of the most active groups at Savills property auctions.
Meanwhile, the spread of lots on offer and the diversity of our auction catalogue – which takes in everything from ground rents to mixed-use opportunities and tenanted properties – means that there is something for everyone. It is for this reason that the auctions market could be cited as the “stock market” for property.
Whatever one’s budget, what unifies all buyers is their motivation to make a savvy property investment. Against a property landscape that has been affected by the introduction of higher rates of stamp duty, a cut to mortgage interest tax relief and tighter lending criteria, the auctions market has proven to be resilient. Where pricing has been the most prevalent industry theme, the auction room has led on price adjustments. And, while buyers are certainly more selective, sensibly and realistically priced properties continue to draw in determined buyers.
So far this year, Savills has sold 80% of lots offered, equating to a sales volume of more than £150m. This follows on from the £3.5bn of property sold at UK auctions in 2016, based on Essential Information Group figures, demonstrating just how much the industry is worth. As we move into the final quarter of 2017, we expect to see continued popularity for lots in emerging locations and properties with the opportunity to add value.
Whether a first timer or a veteran investor in the auction room, recognising what and where to buy at auction is key.
More owner-occupiers
There has been a notable rise in owner-occupiers turning out at our auctions hoping to bag themselves a home to live in. The reason for this is threefold. Primarily, buyers recognise that auction prices sit more closely in line with current market conditions and in their search for realistic pricing, come to the auction room to satisfy that. Additionally, there’s always been a demand for doer-uppers and makeover projects and property auctions provide a plethora of options for buyers seeking lots to transform into their own grand design. Finally, auction’s media profile has educated this pool of buyers on what these events entail and, as a result, they have become far more accessible property purchasing platforms to many more people.
Most owner-occupiers will have a preferred location, be it London or elsewhere in the country. Often with a property auction, it is about defining a search radius, being open minded and considering the potential that lots within it might offer. Although at first glance a property might not be as visually appealing or have the living accommodation required, if it is in the right location at the right price and also has the potential to extend or add value, it could be one to bid on.
Developers comprise a strong proportion of our auction buyers and in recent times have had to become accustomed to the “new normal” in the auctions industry. These buyers will focus on value areas and places tipped to be on the rise.
Being ahead of the curve and getting into a changing neighbourhood is a wise investment. While Crossrail has been a buzzword in the auction room for the past few years, transport links will continue to play into developers’ criteria as they seek a deal on a place where they can make a profit. Lots with land, planning permission and the potential to be reconfigured are the ones that see the most interest.
Plenty of opportunities
While there has been a slowdown in residential rental investors buying at auction, it still remains a buying platform that offers them plenty of opportunities. For these buyers, creating a rental investment is a wise move. Seeking out lots requiring refurbishment and that have capacity to add a bedroom or grant a lease, for example, rather than “oven ready” properties with sitting tenants, is advisable. Moreover, a house in multiple occupation rather than a single tenant will also provide a better rental income.
Finally, the UK high street is constantly evolving and throwing up new challenges but the auctions market is still a relevant one for commercial investors. For these buyers, picking out commercial lots that also have apartments or some form of residential space is key, as this broadens their income potential.
Over the past year our lots have sold at prices ranging from £150 to £7m. It’s just about finding the right property for you and making a successful bid.
Chris Coleman Smith is director, national auctions, at Savills
