AUCTIONS
Who are the investors? For property investors that were in the position to buy, the auction market in 2011 continues to be strong, largely as a result of the property rental market. People are finding it difficult to get on the property ladder and for landlords the resultant falling house prices and rising rental yields are creating big opportunities to buy. We’ve seen our cash-rich clients keen to
spread their money across a number of investments by utilising auction finance and we’re seeing investors entering the room with one property in mind and leaving with several. The deals have been too good to miss. An interesting trend we’ve seen in is the
growing number of professional women entering the buy-to-let market. Many female investors I’ve spoken to cite a range of reasons for placing their bids. Owning property can be a way of boosting pensions and ensuring financial stability but for many it’s not just about making money, it’s a case of satisfying their desire to renovate properties. Another trend in the auction room is the
rise in parent property investors. With university fees soaring to £9,000 per year in 2012, parents in the position to buy have been coming to the auction rooms, often for the first time, to purchase properties to let to their offspring, rather than paying property rents to a third party. Investing is definitely a growing trend
amongst parents. Student property is a solid investment for the future in key areas and there are excellent deals if you do your research. We had seen a lull in this type of purchase but it’s becoming more popular.
We’ve also seen increasing interest from
investors overseas. A number of East Asian investors snapping up commercial property in auction rooms across the country has been noticeable this year. East Asian investors are the biggest spenders with more than £52bn of Asian equity seeking acquisition in the UK commercial property market. Buyers from Indonesia, Thailand, Taiwan and China are the latest we’ve seen targeting the UK commercial property market.
What are they buying? Both residential and commercial properties have sold well. Our lending has seen a split of 20 per cent on commercial and 80 per cent on residential – with the majority of these being on traditional property types. Government proposals in The Budget
had a knock on effect undoubtedly. We saw investors grasp properties following the announcements to relax planning permission rules. In fact, we saw many investors snapping up commercial properties planning to convert them for residential use.
Our cash rich clients are
keen to spread their money across a number of new investments.’
An example of this has been the large
numbers of pubs being purchased at auction for alternative use, such as residential conversions, retail units and even day nurseries. Some have also been leased back as free houses. A large portion of the stock coming into
auctions has been repossessions. In terms of residential properties more than 20 per cent of all lots offered at property auctions are repossessions. The banks want speedy sales and investors want to grab a bargain – the auction rooms are perfect for this type of property. It’s likely that more repossessed
properties will be sold in the auction room well into the start of 2012 especially as interest rates creep up and many of the high street banks have yet to release into the market. Buy-to-let investors who do their research can find properties that achieve strong yields and make excellent long term investments especially those in city locations where rental values have increased quicker than out of town properties, climbing on average by £131 a week £524 a month over the last decade. If I had to pick two property types that
have been favoured by the auction room investors, I’d say new-build flats and terraced properties. New build flats saw their prices slashed in auction rooms with average reductions the highest seen in five years. The average reduction on new build properties sold at auction during 2010 was just under 50 per cent according to The Essential Information Group (EIG). People who associate auctions with older properties are mistaken; it’s a shame because auction rooms are where you will find former new builds at ridiculously low prices, sometimes at half of their original asking price. This year investors have started to catch on to this and are reaping the rewards. The same goes for terraced properties, we’ve lent more than £8m for the purchase of terraced properties this year, an increase of 22 per cent, proving them to be a popular choice.
2012
All in all, we bid a fond farewell to 2011. The year has treated the auction sector kindly. Hopefully this success will continue in 2012. There’s certainly plenty of stock for the taking and we’re here to help if your clients are looking to invest next year.
www.auctionfinance.co.uk
Do you have any views on auctions?
www.propertydrum.com/articles/aucdec
58 DECEMBER 2011 PROPERTYdrum
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