With the interest in the UK housing market edging up in March, according to the latest Royal Institution of Chartered Surveyors (RICS), B&C got in touch with Benjamin Tobin, Chartered Surveyor and Director of Strettons, to ascertain whether the results of the London auction houses from the last month are showing similar signs of life…
Results from the London property auctioneers since the beginning of March show mixed results as the table below shows. The table shows the most recent sale first (3 April) down to the earliest (6 March):
|Lots offered||Lots sold||% sold||Realisation||Content|
|Andrews & Robertson||85||47||56%||£8,658,500||res/com|
|Jones Lang LaSalle||16||14||88%||£9,920,000||res/com|
But statistics can conceal trends. We can have two successive sales where we have a 75 per cent success rate but I can find one very hard work with each lot necessitating a lot of effort to drag bidders up, in a half empty room, to just scrape reserve, whereas the next sale, while producing the same result, can be relatively effortless with bidding often starting above reserve and several bidders competing for most lots.
You also need to look at levels of prices and source of lots. It should be very hard not to sell pretty much 100 per cent of lots offered for mortgagees, receivers or local authorities so this may not be a reflection of a strong market.
Strettons’ experience in April (and to a slightly lesser extent in our February sale) suggested that things are improving but apart from a better willingness to bid, what other trends are there?
My impression from speaking to buyers and lenders is that there is a slight improvement in the availability of funding, especially for development rather than investment properties. A freehold commercial unit in Camden, N7, with planning for three flats and a commercial unit far exceeded expectation selling for £610,000 off a guide of £150,000 plus.
A 1930s semi-detached house in urban Essex with consent to split part of the garden to build a small two bedroom house sold for £510,000 against a reserve of £450,000. The buyer is left with the original house although the site is less spacious so that the value of this is reduced.
Obtaining new funding for commercial investment is still tough, but if buyers are able to “leapfrog” by funding a property that they already have and using the proceeds to buy the next one, which is then funded but they are building a relationship with a lender, there seems to be a better chance.
Equally, for commercial lots, there are lots of private pension funds with £500,000 to £1 million earning very little in the bank, who seem to be prepared to buy commercial investments, even where they are not traditional pension fund stock.
Examples are two shop investments which we sold in April in Waterloo, let to indifferent covenants, which sold for £355,000 and £432,000 against reserves of £219,000 and £249,000. In East Ham, London E6, a small part of a shop let to Superdrug for five years certain sold for £780,000 against a reserve of £749,000. On the face of it, the yield of 7.47 per cent looks attractive but I have noticed a marked reluctance from funders and investors to lend off parts of properties. In fact, my feeling is that this adds to the scope and thus, the attraction.
The market anywhere outside London is certainly weaker, especially where there is uncertainty, so that a car sales site in Buckinghamshire let at £45,000 with a break clause this year and probably with some development potential sold for £350,000; a yield of 12.85 per cent. With a longer term or planning consent in place it would have looked quite different.
A portfolio of perfectly presentable houses in Rugeley, Staffordshire, producing £42,458 per annum sold for £462,500, a net 8.7 per cent. In London the yield would probably have been a good two per cent less.
At our February sale we achieved similar results and we noticed similar trends but we had to work a lot harder for our money, although even then we were noticing an appetite for development in the right location. In Crouch End, North London, we sold a former British Legion Hall without any consent and clear development potential, albeit probably after a battle with the planners, for over £1 million against a reserve of £675,000. The developer buyer didn’t seem perturbed by the lack of consent.
In contrast, our December sale was poorer still – our auction report for the year stated, “to end the year, mixed results generally reflecting the tone of 2011 being one of a generally cautious market led by a variety of factors, not least limited loan security finance, but with realistic prices being paid for sensibly priced lots.”