Residential Auctions. Annual Review allsop.co.uk

Transcription

1 Residential Auctions Annual Review allsop.co.uk 1

2 Contents 04 Allsop residential auction results 05 overview 07 Property analysis 12 Yield analysis 14 Vendor analysis 15 Buyer analysis 16 auction sale highlights 23 Outlook for auction dates 24 Contact us

3 Allsop residential auction results Totals raised ( m) and success rates (%) & overview In, Allsop Residential Auctions raised a total of 425m, achieving a success rate of 79%, higher than the market average of 75%, and cementing its market leading position for 23 years running. Feb 64m 83% Mar 53m 72% 74m 86% Jul 52m 76% Sep Oct 71m 80% 64m 73% Dec 70m 88% 46m 86% Feb 76m 76% Mar 58m 81% 69m 80% Jul Sep 55m 79% 59m 80% Nov 68m 75% Dec 47m 74% Last year, the residential market faced a number of challenges, including deepening unaffordability and significant political uncertainty on the back of strained Brexit negotiations and a General Election. This has been compounded by the 3% stamp duty surcharge introduced in and tougher lending criteria hitting BTL investors with four or more properties. Despite this, Allsop s residential team achieved a total only 7m lower than. Across the UK commercial and residential sectors Allsop raised a total of 1.034bn, with an overall success rate of 82%. In total 1,222 residential lots were sold with an average value of 348,000, compared to 356,000 in. High value lots continued to remain popular in the auction room with 99 sales realising in excess of 1m. Despite the political upheaval surrounding the April announcement of a snap General Election, s auction, which was the most successful of the year, raised a total of 74m and achieved a success rate of 86%, notably higher than in (80%). However, the repercussions of growing political uncertainty in the wake of the election result were felt in July s auction room. The first sale following June s General Election raised a total of 52m and achieved a success rate of 76% - respectable, but one of the lowest of the year. Confidence returned to the Allsop residential auction room in September with a 71m result and a success rate of 80% - 12m higher than in and topping all September residential sales figures on record. This was despite a backdrop of weak post-summer auction results elsewhere. It was a property in St. Ives in this auction that caught the imagination of the public and investors, selling for 1.44m from a guide price of 625,000+. The weakening of sterling last year, a result of the UK s decision to leave the EU, continued to spark demand from overseas investors and strengthened competition in the auction room. This is in line with recorded overseas interest in the Allsop online catalogue, which received more than one million visits from 194 territories globally, of which 48% were new visitors. Total Raised Lots Sold Success Rate Average Lot Size Lots over 1m 425m 1,222 79% 348, m 1,222 78% 356,

4 Property analysis Investment / vacant In total, 810 fully vacant properties were sold in. This is an increase of 16% from the 698 transacted in. On the other hand, the number of investment properties offered decreased from 464 in to 361 last year. Similarly, fewer part vacant lots were sold 58 went under the hammer in compared to 62 the previous year. Percentage of property type offered Property type raised 66% Pure Vacant 300m 250m 29% Pure Investment 200m 150m 5% Part Vacant 100m 50m 0m Pure Vacant Pure Investment Part Vacant Lots offered Lots offered Lots sold Lots sold Pure Vacant Pure Investment Part Vacant

5 Commercial / residential Regional distribution of properties sold in The proportion of purely residential property by volume of lots sold in was down slightly from (80% from 82%). However, the value raised from this sample increased from 279m to 302m. The proportion of properties offered in London and the South East remained broadly similar in at 59% of the total ( 60%). The proportion of commercial properties offered in was 9% of the total, up from 7% in. However, the total raised was down from 56.5m to 37m. Many of the more valuable commercial lots offered were vacant office buildings with permitted development rights (PDR) or potential for residential conversion. These opportunities have been very popular since 2015 (when 65m was raised from this sector). Over the last year however, good quality PDR opportunities have been scarcer and buyers have become more discerning. Last year, permitted development rights for conversion to residential use were extended to light industrial buildings. Few such opportunities found their way to auction, however. The proportion of mixed use lots sold rose slightly last year from 11% in to 12%, although the total value raised fell from 93.5m to 87m. In fact, in all other regions, with the exception of Northern Ireland, regional distribution of lots remains roughly consistent with. Whereas only four Northern Irish lots were offered by Allsop under the 5% South West 2% N. Ireland hammer in, 27 were offered in. This has been due to the increased liquidation of distressed stock by buyers of loan books with particular exposure to the area. 1% Wales 1% Scotland Percentage of property type offered Property type raised & number of lots sold 5% North East 80% Residential 350m 300m 975 7% Yorkshire & The Humber 43% M25 12% Mixed Use 250m 200m % North West 9% Commercial 150m 100m 50m m 113 Residential Commercial Mixed Use raised 2015 raised raised 11% Midlands & East Anglia 16% South East 8 9

6 Average price achieved for vacant single units (houses and flats) The average price of a single vacant unit at our sales was 346,000 ( 352,000). When broken down regionally, the only areas to show falls are the M25 (Greater London) and Scotland....although UK annual house price growth ended at 2.6%, London was the weakest performing region. The Scottish sample is small and therefore unreliable. However the fall within the M25 from 622,000 in to 561,000 in is noteworthy. The trend is consistent with the Nationwide Building Society House Price Index. This shows that, although UK annual house price growth ended at 2.6% (compared with 4.5% in ), London was the weakest performing region with house prices down year on year by 0.5%. 700, , , , , , ,000 0 North East North West South East South West M25 Midlands & East Anglia Indeed, we identified towards the end of last year that affordability levels across the UK, as measured by the price-to-earnings ratio, were undergoing a fundamental redistribution. In London, prices are on average 14.5 times higher than average earnings more than ever before. This is in contrast with the larger UK cities. Prices in Manchester have risen by 7.7% and in Birmingham by 7.3%. Here affordability levels are in line with the 15 year average (source Hometrack). Wales Scotland Yorkshire & The Humber Northern Ireland

7 Yield analysis Assured shorthold tenancies Ground rent investments Our analysis shows that the average yield for assured shorthold tenancy investments sold by Allsop under the hammer in has fallen by 31 basis points from 9.26% to 8.95%. London, however, when separated, has seen a rise from 5.34% on average to 6.04%. Whilst consistent with the general ongoing correction in London house prices, it may also be attributable to early rising rents in the capital. Landlords have been facing a 3% stamp duty surcharge on Buy to Let (BTL) investments since April. And in January, the Bank of England introduced stress testing for portfolios, requiring greater coverage of mortgage payments from rental income (145% up from 125%). Add to this, anticipated creeping interest rate rises, as well as the tapering of tax relief on BTL mortgages, and the case for residential investment becomes less attractive. These measures may cause existing landlords either to withdraw from the market thereby potentially reducing the availability of accommodation to rent or to hold on and increase rents (where sustainable) to meet outgoings. Average ground rent yields, for investments having 80 years or more to run, have swung between 2.2% and 7.2%. This is reasonably consistent with. This time last year, we identified the fact that investors were bidding more for ground rents having between 80 and 100 years unexpired, thereby attributing reversionary value to longer income streams than the 80 year statutory limit for enfranchisement pricing set by the Landlord and Tenant Act This highly specialised market has however recently come under Government scrutiny. In December, the Communities Secretary announced new measures to deal with unfair and abusive practices within the leasehold system. Measures to be introduced include legislating to prevent the sale of new build leasehold houses except where necessary (such as shared ownership), requiring that ground rents on new long leases, for both houses and flats, are set at zero and working with the Law Commission to make the enfranchisement process faster and cheaper. A controversial Private Member s Bill (the Leasehold Reform Bill aka the Leasehold Emancipation Bill), introduced in November last year and due to have its second reading in February, aims to cap the price that a leaseholder would pay to purchase their freehold at no more than ten times the annual ground rent. This was introduced under the Ten Minute Rule. It will be met by strong opposition from landlords and is considered unlikely to become law. Average AST yields Regulated tenancies Average gross yields 15% Outside London 12% London Only 9% 6% Overall Average 0% 2% 4% 6% 8% 10% 12% In Allsop sold 26 regulated tenancy investments by auction (also 26 in ). The average yield was 3.63% (4.62% in ). The individual yields achieved, however, fluctuated between 2.4% to 4.4%. 3% 0% Feb Mar Jul Sep Oct Dec Feb Mar Jul Sep Oct Dec Regulated AST Ground Rents (80+ Years) Bank of England Base Rate 12 13

8 Vendor analysis Buyer analysis Once again the predominant vendor class was the property company contributing 42% of all lots to the room (41% in ) with a further 22% contributed by private sellers (25% in ). There has been a small increase in distressed lots from 16% of the total in to 18% in. International Interest Shown in the Online Catalogue in 1 UK 2 Ireland 3 Western Asia 4 Southern Europe Percentage of lots offered (vendor type) 5 Western Europe 6 Northern America 7 Africa 6% Local Authority 2% Statutory Body 8 Southern Asia 9 Southeast Asia 2% Trustee 10 Eastern Asia 11 Australasia 1% Misc 12 Northern Europe (exc UK & Ireland) 13 Eastern Europe 14 Caribbean 15 South America 8% Housing Association 16 Central America 17 Central Asia 42% Property Company Top 10 locations of UK visitors to the online catalogue 1 London In the online catalogue received a total of 1,048,000 visits from 194 territories globally. 48% of these were new visitors. Remote bidding 71% Phone 2 Birmingham 3 Leeds 4 Manchester 18% Distressed 5 Croydon 15% Internet 6 Watford 7 Slough 8 Bristol 9 Liverpool 14% Proxy 10 Sheffield On average, 105,000 visits were made to the online catalogue during the three week marketing period preceding each of the seven sales held. 22% Private 14 The number of registered remote bidders in was 997. This compares with 1184 in and 1303 in Of those methods available to bidders, the phone remains the most popular (71%) followed by proxy (14%) and online bidding (15%). 15

9 Lots with planning permission or permitted development rights (PDR) Crawley, West Sussex February SOLD PRIOR Guide 7M+ Paddington, London W2 March SOLD 1.15M Guide 810,000+ Town centre office building with planning granted for 111 flats and PDR for further 76 flats. Two units in a Grade II listed building with planning to provide a single two-bed property. Whitechapel, London E1 SOLD 2.355M Guide 2M+ West Bromwich, West Midlands SOLD 1.45M Guide 1M+ Building with planning for retail unit (A1 Use) and seven apartments. Five storey commercial building with PDR for 47 dwellings. Stevenage, Hertfordshire July SOLD 1.805M Guide 1.4M+ Kingsbury, London NW9 September SOLD 3.21M Guide 2.85M+ auction sale highlights Town centre office building with PDR for 21 flats. Residential / B1 development opportunity with PDR for 17 flats

10 Lots with development potential Income producing Harrow, Middlesex February SOLD 1.925M Guide 1.25M 1.5M Greenford, Middlesex March SOLD 2M Guide 900, ,000 Harringay, London N15 SOLD 1.67M Guide 1.3M Leeds, West Yorkshire September SOLD 445,000 Guide 325,000+ Former library with potential for conversion to flats. Former health care centre with potential for redevelopment. Two adjoining mid terrace buildings providing ground floor retail unit and eight flats subject to ASTs. Total current gross rent reserved 133,412 per annum (equivalent). Ground rent investment secured upon a purpose built block providing 74 apartments. Total current rent reserved 17,489 per annum. Belfast, Norther Ireland July SOLD 1.3M Guide 1.25M+ Clapham North, London SW9 October SOLD 3.44M Guide 3M+ Cardiff October SOLD 1.18M Guide 1.1M+ Battersea, London SW11 December SOLD 1.615M Guide 1.35M+ Development site extending to approximately 4.22 hectares (10.43 acres) with development potential. Site comprising end of terrace corner building and former rehabilitation centre. Long leasehold upper parts arranged to provide student accommodation. Total current rent reserved 172,664 per annum (equivalent) from 14 flats with two flats vacant. Six storey mid terrace mixed use building providing ground floor shop and four flats subject to ASTs. Total current rent reserved 110,860 per annum (equivalent). Tenanted lots Unusual lots Teddington, Middlesex SOLD 610,000 Guide 500,000+ Prestbury, Cheshire July SOLD 1.8M Guide 1.6M 1.8M Royston, Hertfordshire February SOLD 307,500 Guide 90,000+ Chelsea, London SW3 October SOLD 300,000 Guide 275,000 Mid terrace two bedroom house subject to a regulated tenancy. Current rent reserved 10,374 per annum. Detached six bedroom house subject to an AST. Total current rent reserved 12,000 per annum (equivalent). Former telephone repeater stations. Leasehold 19 sq m (204 sq ft) third floor flat subject to an AST

11 High value homes Westminster, London SW1 February SOLD 2.1M Guide 2.1M+ Coaley, Gloucestershire SOLD 1.555M Guide 1.6M+ Leasehold four bedroom ninth and tenth floor penthouse. Grade II listed six bedroom house with two bedroom barn conversion, swimming pool, orchard and paddock. West Hampstead, London NW6 SOLD 2.505M Guide 2.5M+ Chalmington, Dorset July SOLD 1.43M Guide 1.25M 1.5M Mid terrace six bedroom house with four bathrooms, garden and first floor roof terrace. Grade II listed 12 bedroom manor house set in a hectare (34.38 acre) estate. St Ives, Cornwall September SOLD 1.44M Guide 625,000+ Marylebone, London NW1 October SOLD 1.18M Guide 1M+ Three bedroom detached house overlooking Porthmeor Beach. Long leasehold three bedroom purpose built fifth floor flat

12 Outlook for 2018 We see 2018 being a year of correction as different sectors of the market and regions of the country come to terms with tougher taxation and mortgage regulation, rising interest rates and political instability. But as always, change brings opportunity will not be without its challenges. But the purchasing opportunities presented across the market will be interesting. The smaller buy to let investor may seek to disinvest as a combination of interest rate rises and tapering tax relief on investment income diminishes net returns. This could result in an increase in the flow of vacant single units and assured shorthold tenancy investments to the auction room. Reserve prices will need to take account of the impact of the 3% stamp duty (SDLT) surcharge applicable to investments and second homes. Investor bidders will also find the availability of finance more restricted following the introduction by the Bank of England of portfolio loan stress testing. Home buyers will also be challenged by stricter lending criteria and the need for substantial deposits. Of course the Government s Help to Buy scheme will help ease transactions in the new homes sector. The Bank of Mum and Dad will come to the rescue in the second hand market. All this points to one thing in 2018, cash will be king. Most commentators accept that London prices will on average remain static this year. But break this down to postcodes within the M25 and there is likely to be a great deal of variance. The prime central London market has been hit by uncertainty over Brexit and a general loss of confidence. Further falls, particularly in the value ranges above 5m, will be likely. The suburbs and the Home Counties will show steady growth in 2018 as London buyers look for more space for their money. As forecast last year, the regional cities will continue to offer higher yields and better prospects for capital growth. The new build market will be one to watch. There have been warning signs appearing in this sector. Oversupply is apparent in parts of London, Nine Elms being one of the most notable. Help to Buy is supporting disposal programmes and sales prices to a degree. But in the absence of underlying economic growth and low unemployment, this situation may not be sustainable. Some developers will offer ever more creative incentives and eventually price reductions this year. New build house prices in the principal regional cities will continue to rise during the first half of 2018 but the potential risk of oversupply here too should not be ignored. Institutional interest will pick up but discounts will be expected for bulk purchases. Smaller scale residential development opportunities, with and without planning permission, are likely to feature in the auction rooms this year. In September last year, the Government published a consultation paper setting out proposals to reform the planning system and increase the supply of new homes. This should encourage the sale of land to release value, particularly in areas of greater housing need and more limited affordability. In previous years we have noted the stability of the regulated tenancy investment and ground rent markets. We see this lack of volatility continuing for regulated investments. These are in diminishing supply and demand from the specialist investors remains keen. The ground rent market is set to change. It is proposed that payments on newly established leases of houses and flats will be set at a peppercorn. The value of such freeholds as investable assets will diminish considerably. It is unlikely that legislation will affect existing contractual ground rent commitments, through retrospective legislation for example. The proposal for capping enfranchisement prices to ten years purchase particularly for existing leases is of less concern. We are unlikely to see the full process of leasehold reform concluded before In the meantime, present day concerns over future changes may affect the immediate market for ground rents and consequently some impact on values is possible will not be without its challenges. But the purchasing opportunities presented across the market will be interesting. The Allsop auction team will, as always, be endeavouring to ensure that pricing is realistic. We look forward to welcoming your participation in our sales during the year ahead

13 Forthcoming auction dates for 2018 Contact us Residential 15th February 2018 InterContinental, One Hamilton Place, Park Lane W1J 7QY Online catalogue available: 27th January 2018 Gary Murphy LLB FRICS Partner 1986 Richard Watson MRICS Partner 2001 Zoe Baxter MRICS Associate th March 2018 InterContinental, One Hamilton Place, Park Lane W1J 7QY Online catalogue available: 10th March st 2018 The Cumberland Hotel, Great Cumberland Place, London W1H 7DL Online catalogue available: 12th 2018 DDI: +44 (0) DDI: +44 (0) DDI: +44 (0) th July 2018 InterContinental, One Hamilton Place, Park Lane W1J 7QY Online catalogue available: 30th June 2018 Christopher Berriman BA FRICS Partner 1987 Jamie Clarke Partner 2007 Tom Wright MRICS Associate th September 2018 The Cumberland Hotel, Great Cumberland Place, London W1H 7DL Online catalogue available: 25th August 2018 DDI: +44 (0) DDI: +44 (0) DDI: +44 (0) th October 2018 The Cumberland Hotel, Great Cumberland Place, London W1H 7DL Online catalogue available: 6th October th December 2018 The Cumberland Hotel, Great Cumberland Place, London W1H 7DL Stuart Gayer MNAVA Partner 1988 Simon Hepworth Partner 1999 Laura Kerr MRICS Senior Surveyor 2009 Online catalogue available: 24th November 2018 Commercial DDI: +44 (0) DDI: +44 (0) DDI: +44 (0) The Berkeley, Wilton Place Knightsbridge SW1X 7RL Tuesday 6th February 2018 Online catalogue available: 13th January 2018 Jourdan Prowting Partner 1997 Simon Capp Partner Will Taylor Senior Surveyor 2012 Thursday 22nd March 2018 Online catalogue available: 3rd March 2018 Tuesday 15th 2018 Online catalogue available: 21st April 2018 DDI: +44 (0) DDI: +44 (0) DDI: +44 (0) Tuesday 3rd July 2018 Online catalogue available: 9th June 2018 Tuesday 16th October 2018 Online catalogue available: 22nd September 2018 Richard Adamson Partner 2001 Jimmy Bruce Partner 2008 Gabriella Brunton MRICS Surveyor 2015 Tuesday 4th December 2018 Online catalogue available: 10th November 2018 DDI: +44 (0) DDI: +44 (0) DDI: +44 (0)

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