Property auctions were once best known as the place to purchase ex-council homes and repossessions, but in recent years an increasing number of £1m-plus properties have been sold under the hammer.
There are a number of reasons why owners of high-value properties might be turning to auctions to sell, ranging from needing a quick sale to simply wishing to reach an ever expanding international market.
Selling substantial properties that need a lot of work, or even demolishing and rebuilding, can be challenging on the open market, yet these buildings are well suited to the auction room. This type of property is typically most attractive to experienced developers, which are best placed to weigh up the benefits, assessing the costs of the project and the potential returns. Property auctions are usually packed with this type of buyer, who won’t be put off by the prospect of an extensive build or refurbishment job. This offers vendors the best possible chance of achieving a fair price, such as the £1.8m recently paid for a double-fronted property in Tooting Bec, SW16, in need of complete upgrading.
Unusual prime properties can often be hard to value, but they can also be suitable candidates to be offered at auction, and each style of property must be judged on a case-by-case basis. Previous examples include a rarely available two-bedroom semi-detached cottage overlooking Wimbledon Common, SW19, which sold for £2.5m off a £1m guide.
Offerings at our 21 September auction will include Eilean Aigas, a 547-acre estate in the Scottish Highlands. The estate, situated on its own private island, comprises a newly built 28,000 sq ft mansion and a renovated house dating back to 1839. The scale, quality, privacy and diversity of Eilean Aigas makes it hard for the market to pin a price on, but offering it at auction with a £3m-plus guide allows all interested parties to compete out in the open, whether from the UK or abroad.
For some vendors, it is the transparent nature of selling at auction that is the main attraction. Councils, charities and mortgage lenders often sell properties at auction because they believe it is a fair, open way to conduct a sale and a good way to establish market value. We regularly sell properties for this purpose, including high-value lots – a prime example being a mews house close to Hyde Park, W1, that we sold at auction for £3m on behalf of a charity.
Mixed-use buildings offering both commercial and residential space are also highly sought after at auction, offering buyers the opportunity to invest in two well-performing sectors of the market in one transaction. Vendors can again benefit from a high proportion of investment buyers in the room, as shown by a mixed-use end-of-terrace building in Southwark, SE1, arranged as a shop and a self-contained maisonette. It sold for £1.1m from a £500,000 guide.
In a similar vein, properties with existing tenants in place that might struggle on the open market are ideal auction lots for investors, as they come with guaranteed rental incomes, eradicating the risk of a void period early on. A Victorian house arranged as four self-contained flats all let on assured shorthold tenancies in Tufnell Park, N7, with total rental returns of £70,980 per annum, sold for £1.8m at our June auction.
Vendors looking to shift sites with planning permission in place can also benefit from exposure to the builders and developers attracted to property auctions. These lots provide bidders with a ready-made project, cutting out delays caused by planning applications, and often attract stiff competition as a result. In West Kensington, W14, a property arranged as two shops and two flats that also came with planning permission for an additional flat and rear extension recently sold for £1.4m from a £1.2m guide.
The speed of selling at auction is attractive to vendors looking for liquidity, minimising any chance of buyers changing their mind after offering, or long chains holding up the sales process. At Savills’ auctions a 10% deposit is put down by the buyer on the day, with completion usually taking place after 20 working days when the remaining balance is paid. This compares well when you consider research by Rightmove found the average time to sell a home was 65 days, rising to 113 days in some areas of the UK.
Chris Coleman-Smith is head of auctions at Savills
