COMMENT As the hammer went down on our final sale of 2020, it sealed a year and a performance that surprised us all. As the third lockdown set in, raising significantly more than the previous year seemed almost unthinkable, but as the months ticked by we began to feel as though it could be within reach.
Not only did we hold our biggest December sale since 2015, we also totalled 30% more than our last auction of 2019.
We are now a quarter into 2021 and that momentum has remained. For the first time in a while there’s a genuine demand across all asset classes, as well as a cross-section of buyers active in the market.
The key takeaway is that all are looking to transact on quality property, be that in terms of location, build type, the investment opportunity or potential yield presented. Of course, there’s no doubt we have a tough time ahead, but if the final results of last year and the first few months of 2021 are anything to go by, we may see those strong levels of market confidence and commitment remain.
Back in 2016 we saw the impact that the 3% surcharge for additional homes (effective from that April) had in the auction room; that February we had a bumper sale, with nearly 200 lots sold and circa £70m raised. So it was clear that the stamp duty holiday would have similar effect. A buyer and seller survey by our residential research team in December reported that 25% of respondents were seeking to beat the 31 March deadline, a sentiment echoed by many of our clients too.
A remote method of sale offers flexibility, meaning we had the opportunity to meet this demand by holding two spring sales. The fact that we registered more bidders in February than ever before, coupled with around 200 lots being sold for circa £80m across both auctions, highlights just how much of a driver the deadline was for buyers to transact. A saving of up to £15,000 is, of course, a significant figure – either to put into owner-occupier refurbishments or to go towards profit margins for developer and investor clients. Given that the stamp duty holiday has been extended, we’ve adjusted upcoming auction dates to accommodate several additional sales before it ends and already we’ve seen encouraging indicators.
Lifestyle purchasers
Last year, conversations with our residential colleagues highlighted that a shortage of stock, particularly detached homes, proved to be one of the key features of the market. Recent Savills research identified that in the past year across east and southern England, there’s around a 35% shortage of detached houses for sale so it’s no coincidence that we’ve witnessed real appetite for this housing type when it has come up at auction.
For example, in March we sold a five-bedroom farmhouse with attached cottage in Devon for £1.7m, which was a great illustration of the kind of lifestyle property currently sought by owner-occupiers. But it’s not solely end users purchasing houses and what we have continued to see play out this year is that houses do pique the interest of developers and investors drawn in by what they deem to be a reliable asset.
We’ve already sold a number of houses in residential areas such as West Hampstead, NW6, and Crystal Palace, SE19, for upwards of £1m, and we would expect to see competitive bidding for similar opportunities as the year progresses. When it comes to flats, size, location, condition and outside space are all aspects that have strong sales appeal. So far this year we’ve had the best bidding activity for lots that present one or some of these features and we would anticipate popularity to remain high.
Meanwhile, development sites form an asset class that has really picked up pace in more recent times, simply due to the rarity of finding a suitable and well-located offering. Across both spring sales, several sites in London and other key regional cities such as Cardiff sold well and we expect this asset type to continue in its popularity.
Towards the latter part of 2020 and into this year, we’ve had some real stand-out mixed-use assets and alternative use class properties which have commanded strong results. In March, a mixed-use commercial and residential opportunity in Notting Hill, W11, went for 25% more than its £950,000 guide, while towards the end of last year a 50-room care home with residential potential in Birmingham had a hammer price of £1.45m. Ultimately, where there are multiple angles to maximise rental income or develop further, these opportunities are being well received by the market.
Earlier in March, Savills upgraded its 2021 forecasts for UK house prices from zero to 4% growth, citing the speed of the vaccination programme along with government support for jobs and housing as key factors. It’s often said that it’s our trading floor – the residential auction – which is regarded as the front line of housing market activity so eyes will be on our April sale. Of course, we expect to come up against challenges in the months to come, but as we saw last summer, when restrictions began to lift, pent-up demand was released into the market.
After a longer and colder lockdown, some spring weather, easing of restrictions and the vaccine roll-out, we could see a considerable pick-up in activity. I personally hope 2021 is a much better year for everyone.
Jeremy Lamb is director at Savills Auctions
