THE BIG story in auctions is the possible April 1 hike in stamp duty. A 3 per cent rise for second homes i s going to hit the auctions market hard, because salerooms are the natural habitat of the buy-to-let investor. While previous years’ auction press has been dominated by large lots and mighty purchases, this story is all about the little guy: purchasers of residential lots worth £100,000-£500,000. And it ignores anyone with a property portfolio. The current prediction is that the hike will not affect landlords of 15 properties or more.
In the short term, fear of this stamp duty increase is boosting sales, as both buyers and sellers work hard to beat the possible April 1 deadline. Even though the hike is not confirmed — it is subject to a consultation which expires in February — the market is hedging against a possible tax rise.
“It is difficult to say the real impact of this extra 3 per cent,” says Jonathan Ross of Barnett Ross. “The hype from agents is that you have to get in before April or you will pay the extra 3 per cent. I think it will hopefully mean a flurry of instructions before April. However, I am not happy about extra stamp duty. At this level you are now pushing out a high percentage of the market. The government is doing its best to stifle buy-to-let.”
At Allsop’s October sale, it offered a vacant three-bedroom flat in London SW18, on behalf of the Ministry of Justice. It had a guide price of £400,000plus but failed to sell. In December, it was re-offered at £375,000-plus and was knocked down for £450,000.
Allsop auctioneer Gary Murphy says: “We sensed that the buoyancy in the room in December reflected buyers’ eagerness to invest before the 3 per cent stamp duty hike. No doubt this will be reflected in prices paid in the new financial year. We are advising clients to take advantage of our February auction.”
Savills has added a date to its auctions calendar to cater for pre-hike demand. It has sales on both February 16 and March 2.
Auctioneer Chris Coleman-Smith (who has booked a holiday for April) says: “It will be interesting to see how the market pans out after April.” He still expects 2016 to be a good year for property auctions.
James McHugh of McHugh & Co confirms he is seeing a lot of stock coming to the market from people wanting to sell before April 1. “Especially people holding buy-to-let investments, circa £250,000,” he says.
This flurry of activity comes after a good year for both residential and commercial auctioneers.
“The past 12 months have shown some tremendous prices achieved at auction, mainly due to a lack of good stock coming on to the market, so when something does come on, there are several bidders,” says Mr Ross. “That’s especially on the commercial scene.
“The residential market has had its fluctuations, but in north London it seems to have been unabated. Demand is outstripping supply.”
The only major issue in 2015 for the residential market was a slowdown in buyers from China and Russia.
Allsop closed 2015 with a £68.4 million sale, bringing the amount raised through the firm’s residential auctions, in the room and online, to £457 million for the year. Its December catalogue was mainly larger lots, of which 13 sold for more than £1 million, contributing £33.235 million to the total.
Mr Murphy says: “The room wasn’t as crowded as previous sales this year but there was definitely a determination to buy. Many bidders reported that they were finding prices very steamy across all property types. And this wasn’t just London. Provincial and regional locations are on the rise as buyers look for value outside the capital.”
Lot 185, a 0.378-acre site in Leicester, proves the point. On a busy road and with no planning permissions, the site was sold on behalf of Metropolitan Housing Trust for £700,000, from a guide of £500,000. The largest lot to be sold under the hammer was a freehold 11,700 sq ft office building in Leatherhead, on 0.67 acres with permitted development rights for residential. It went for £2.9 million.
Barry Shaw, a partner at City of London law firm Solomon Taylor & Shaw, agrees that 2015 ended with successful auction sales and prices higher than expected.
“There is still shortage of stock, so that should keep prices up,” he says. “There is a predilection for properties which can be converted to residential use. Buyers are mainly those who don’t need recourse to borrowings, as obtaining bank finance is still extremely slow and painful.”
Savills’ December 14 auction of 159 lots was notable for the sale of vacant freehold residential properties and land. Among the more than 1,000 lots within the M25 was a 0.44-acre piece of land in Kingston-upon-Thames, Surrey, sold by Thames Water. The rectangular site, overgrown with grass and woodland, had development potential, subject to planning consent. Guided at £300,000, it made £1.25 million.
“That is a prime example of using auctions instead of private treaty,” says Mr Coleman-Smith. “A private-treaty agent might have put it on at £500,000 or £600,000 and it would have sold at that level. The underbidder on this lot bought another one in Kingston. They were both determined bidders.”
Andrews & Robertson ended 2015 on a high, with a sale boasting 85 per cent success. It raised more than £15 million from 76 lots, bringing the total for the year to £110 million, a 27 per cent increase over last year, with an average success rate of 88 per cent.
The top lot was a substantial freehold three-floor detached building arranged as four selfcontained flats and four garages, in Blackheath, SE3. Guided at £1.2 million, it attracted strong bidding, achieving £1.4 million. In addition, a portfolio of six properties in Barnsley sold for £132,000. Andrews & Robertson auctioneer Robin Cripp says: “It was a busy sale room and competitive bidding for lots within the M25 and in other well-located towns saw prices pushed well above the guides.”
Auction House London’s record for 2015 was £129 million-worth of sales and national awards. The Negotiator magazine declared the group Residential Auction House of the Year and Best Franchise in early November, followed by another Best Franchise title and Auction Agency of the Year at the Estate Agency of the Year Awards in December.
The Auction House group also hit its landmark 3,000th-lot-sold figure for a second year running. Auctioneer Andrew Binstock says: “We’re delighted with the national accolades for the brand, as well as our recent sales success. Our total sales are up this year from last by 37 per cent.” It achieved an 87 per cent success rate at its December 9 auction. Bidding was brisk, with
buy ers and sellers wanting to exchange ahead of the holidays. A highlight was a two-bedroom first-floor flat in Surrey. Guided at £155,000, it sold for £202,000. Also in Surrey, an end-of-terrace house with three bedrooms sold for £340,000 from a starting guide price of £275,000 and in Leytonstone, East London, a three-storey Victorian property in a parade of shops sold for £154,000 from a bidding start of £115,000. Planning permission is already in place to change part of the shop into a studio flat.
Mr Binstock says: “Property in a good position and at the right price will always attract buyers but where we come in is to secure the best price, often well above the guide price and reserve acceptable to the seller.”
Lambert Smith Hampton’s last sale of 2015 raised just over £10 million with a success rate of 84 per cent. The team held five sales, raising £60 million — up 25 per cent on last year, with an average success rate the same as last year, at 89 per cent.
For Philip Waterfield at Strettons, it was lack of supply in London and the Home Counties that resulted in huge demand for properties and excellent prices being achieved.
The firm’s May sale became an early opportunity for new “pensioners” able to draw down a tax-free lump sum and keen to invest in property. Buyer appetite remained healthy into September, with residential yields averaging a little under 5.5 per cent. Highest price at Strettons’ September sale was £1.31 million for a mixed commercial/residential investment in Hoxton, N1, plus another flat in the block, sold separately for £390,000, a total of £1.7 million.
Strettons’ November sale saw the highest realisation of the year — close to £13 million from an 83 per cent success rate, with highest price of the day being £1.75 million for an industrial estate in Dagenham. This showed a 6 per cent return, followed by just over £1 million for five flats in a converted house in Tottenham, London N17, producing £38,000, a 3.5 per cent return.
Of the more unusual lots, a series of small outhouses in Fulham SW6 with potential for a variety of uses, sold at prices from £8,000 to £20,000 and a former memorial hall in Braintree, Essex with planning for four flats sold for £250,000.
In Strettons’ December sale, it made £1.75 million for a vacant freehold house in Spitalfields, London E1, and £650,000 for a former bar in Stratford, E15, guided at £550,000-£555,000.
The most unusual lot of the day was an income-producing boatyard and part vacant land fronting the Grand
Union Canal in Bedfordshire, sold for £220,000 against a guide of £175,000£180,000.
“Last year, demand outstripped supply to create a highly competitive market and, as Strettons celebrates its 85th birthday in 2016, we look forward to continued demand in the market,” says Mr Waterfield. “We are also anticipating a sea change in the buy-to-let market, as a revised taxa- tion structure kicks in and we may all need to brace ourselves for interest rate changes later in the year.”
In the pure commercial market, there were big bidding battles at Allsop’s final commercial auction for 2015. This saw £60.5 million sold at a success rate of 86 per cent, which puts Allsop Commercial’s final figures for the year at £445.1 million, at a success rate of 90 per cent, the strongest end of year success rate for a decade.
Strong competition in the room saw many sales exceed guide prices. A freehold office investment in New Malden, south west London, let on a short lease, sold at £3.75 million (£266 per sq ft) off a guide of £2.5 to £2.7 million. There were more than 30 bidders for this lot, despite its having been on the market through private treaty for over a year.
“The auction marketing generated new interest — and genuine competition unlocked significant gains for the vendor,” says Allsop’s Duncan Moir.
“The strength of demand is very clear. The lack of quality income in this low interest-rate climate is putting a premium on to the better investments.
“For example, a freehold Kwik Fit in Sheerness was offered, which had sold at auction in early 2015 at 6.25 per cent. Competition in the room pushed this to 5.6 per cent, an improvement over a period of only 10 months.”
Allsop’s newest auctioneer, Will Clough, made his debut in December. His opening lot was a shop investment in Chester-Le-Street, sold for £600,000.
Acuitus’s final auction of the year demonstrated the continued growth in investor demand as £45.033 million of assets sold, at a success rate of 88 per cent. Auctioneer Richard Auterac says: “Investors were out in force and had an appetite for all the sectors across a wide geographic spread. The properties in the main are from portfolio break-ups, receiverships and asset rationalisations by investment institutions and funds selling their smaller properties.
“These are being snapped up by the growing volume of private investors who recognise the convenience of having a wide choice of investments in one catalogue.”
A packed room and concerted bidding highlighted the depth of interest in commercial property by private buyers. Of the 57 lots sold, 15 went for more than £1 million and the average yield achieved was 7.5 per cent. Demand for London properties remained strong.
Auterac expects this momentum to continue, saying: “Sellers are increasingly favouring our multi-channel auctions, which are demonstrating their ability to harness huge amounts of private equity openly and quickly.”
Despite the froth — created partly by stamp-duty fears — there is more of a sense of bust behind us than boom in front of us. Buyers gravitate towards “safe” properties.
“In commercial, lots with good covenants are still popular,” says Mr McHugh. “If people have got money in the bank, they would rather have it in bricks and mortar. If you have a few £100,000s in the bank, you get a return if you buy a property. And you get appreciation as the value of property goes up.”
Site with planning permission in Grange Road, London SE1. Guide price £4.5 million in Barnet Ross’s sale
Sutton Windmill, near Norwich, site including listed windmill, reserve below £250,000 in Barnet Ross’s sale
ColemanSmith: ‘auctions beat private treaty’
Top: Listed manor, Stroud (guide £750,000+), sold by Allsop at £765,000. Above: Crouch End flats (guide £1.2m+) sold by McHugh at £1.87m
Freehold ground rent investment in London NW6. Six flats, one with valuable reversion, in McHugh & Co’s February 25 sale