AUCTIONnews uk property auctions analysis
Rapid dropping talks to
David Sandeman of EIG
Auction sales of new build flats at auction rose steadily from 2005 to Q4 in 2008. Since then, they have taken a dive, as the latest Rapid report, published twice a year, shows.
IN THIS MONTH’S article I have extracted two of the graphs from the recently published RAPID report. RAPID (Residential Auction Property Investment Data) is compiled in conjunction with Allsop, reporting on how the residential auction market is performing. The graphs and text below highlight the rise and fall in sales of new build flats at auction. Download the full report at
www.eigroup.co.uk/market-data/rapid.
Graph 1 Flats falling in value
Graph 1 shows the number of new build flats offered and sold at auction in the UK on a quarterly basis since 2005, together with a line depicting the average fall in value. This is calculated by comparing the price paid at auction and the purchase price initially paid for the same property and recorded at the Land Registry. Sales of new build flats at auction peaked in 2008, with 1,046 being offered under the hammer in H2 2008. Average price falls of over 46 per cent were recorded in this period, and this grew further in H1 2009 to just over 52 per cent. Since then average price falls have steadied themselves at just over 44 per cent, whilst the volume being offered has fallen considerably to just 263 properties in H2 2009. The decline in values coincides with a major shift in the Buy To Let (BTL) market. Landlords who purchased new build stock for investment were faced with the challenges posed by massive over supply, limited tenant demand and escalating debt. Owner occupier demand from first time buyers was virtually eradicated by the mortgage drought. In any event, the new build city centre product was typically built specifically for the BTL market and was often small and unattractive to owners. As BTL loans failed, lenders repossessed and sold at substantial shortfalls.
Graph 2 Flats offered by region
The largest numbers offered at auction have been in the north of England, Scotland and Northern Ireland, peaking at 279 in Q4 2008 and falling to 63 in Q1 2010. Only 2 new build flats were sold in London in the first quarter of 2010.
42 JUNE 2010 PROPERTYdrum Graph 1 SALES OF NEW BUILD FLATS AT AUCTION 2005-2009
700 600 500 400 300 200 100 0
Offered Sold Avg % Price Drop
60% 50% 40% 30% 20% 10% 0%
Graph 2 NEWS BUILDS OFFERED AT AUCTION BY REGION
300 250 200 150 100 50 0
London Mids, Wales & South West SE & Eastern Northern Eng, Scotland & N Ire
The RAPID RePORT Issue 7 summARy Of cOnTenT: Following a fall in distressed sales
at auction, and a rise in private treaty transactions generally in 09, sales levels in both areas are stabilising. Average AST yields across UK have climbed since Q2 07 in all 4 geographic areas to within 7.1% and 9.2% (Q4 09) Average regulated tenancy yields
across UK have risen from 2.9% in Q3 07 to 4.8% in Q4 09. Curve reflects
falling BoE Base Rate. Value falls in new build sector now
less severe as numbers offered at auction decline sharply after Q4 08. Stamp Duty (SDLT) thresholds proven
to be significant barrier to bidding into higher tax bands. Post recession / pre election climate
remains stable despite uncertainty ahead.
Volume Offered
Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10
Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09
Avg % Price Drop
Volume
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