A long slow summer ahead

News

24 June 1989

As the first of those rises hit last autumn, there were fears that the winter would witness an auctions Armageddon — and with sale rates beginning to drop dramatically, disaster seemed very possible. But the first quarter of the year witnessed a spectacular rally by the sector’s leading auctioneers: sales of residential property might have plummeted, but commercial property was holding its own.

Allsop & Co’s February auction raised more than £20m, with 85% of the 107 lots on offer selling. A few days later Harman Healy relived the glorious days of last summer when they sold 90% of the 128 lots on offer and achieved a total of £16m.

Healey & Baker followed suit: their February sale raised £12m with a success rate of 73%. Jones Lang Wootton returned triumphantly to the rostrum on March 1 when they sold all 20 lots on offer to raise £12m.

Since then Allsop & Co and Edward Erdman have demonstrated the continuing strength of the primary and secondary commercial property sector with sale rates of more than 90% at both their subsequent sales.

But those commercial auctioneers trading in tertiary properties have seen this market buckle under the impact of the latest round of interest increases.

Sallmann Harman Healy have raised a combined total of £21.5m at their two most recent sales. But senior auctioneer John Barnett has seen the demand for tertiary properties dry up. “The market for these properties is grinding to a halt,” he states, “and there is no doubt that interest rate rises are to blame.”

Barnard Marcus’ chief auctioneer, Robin Cripp, agrees. “There is plenty of money around for purchasers to borrow,” he says, “and they have been borrowing at higher and higher rates — but now they have had enough.”

However — as Chancellor Lawson intends — it is the residential sector that has been most severely affected by the rises in the cost of borrowing. Auction houses heavily involved in this sector have been sent reeling from the rostrum by the harsh new regime.

While commercial auctioneers continued to ride high in the early spring, residential auctioneers floundered.

At Willmotts’ March sale, the West London firm struggled to raise £2.074m, with just 37% of the 72 lots on offer selling. One week later Hillyers endured a similarly rough ride at the Hotel Russell, WC1, as 35% of the 77 lots on offer sold to raise £1.222m.

The fragility of the sector was chillingly demonstrated at Willmotts’ May sale when auctioneer Vic Herrington had to endure selling only 25% of the 96 mainly residential properties on offer.

Nevertheless, residential investments continued to attract the market and in the northern provinces the still-rising residential market ensured encouraging results for those auctioneers trading in the region.

However, with the slowdown in even these provincial trends, property auctioneers across the country — to a greater or lesser extent — are bracing themselves for a long slow summer.

Relentless interest rate rises — with threats of worse to come — have turned many property auctioneers’ dreams of a spring revival in the popularity of tertiary properties into a disappointing reality of declining price levels and sale volumes. As the first of those rises hit last autumn, there were fears that the winter would witness an auctions Armageddon — and with sale rates beginning to drop dramatically, disaster seemed very possible. But the first quarter of the year witnessed a spectacular rally by the sector’s leading auctioneers: sales of residential property might have plummeted, but commercial property was holding its own. Allsop & Co’s February auction raised more than £20m, with 85% of the 107 lots on offer selling. A few days later Harman Healy relived the glorious days of last summer when they sold 90% of the 128 lots on offer and achieved a total of £16m. Healey & Baker followed suit: their February sale raised £12m with a success rate of 73%. Jones Lang Wootton returned triumphantly to the rostrum on March 1 when they sold all 20 lots on offer to raise £12m. Since then Allsop & Co and Edward Erdman have demonstrated the continuing strength of the primary and secondary commercial property sector with sale rates of more than 90% at both their subsequent sales. But those commercial auctioneers trading in tertiary properties have seen this market buckle under the impact of the latest round of interest increases. Sallmann Harman Healy have raised a combined total of £21.5m at their two most recent sales. But senior auctioneer John Barnett has seen the demand for tertiary properties dry up. “The market for these properties is grinding to a halt,” he states, “and there is no doubt that interest rate rises are to blame.” Barnard Marcus’ chief auctioneer, Robin Cripp, agrees. “There is plenty of money around for purchasers to borrow,” he says, “and they have been borrowing at higher and higher rates — but now they have had enough.” However — as Chancellor Lawson intends — it is the residential sector that has been most severely affected by the rises in the cost of borrowing. Auction houses heavily involved in this sector have been sent reeling from the rostrum by the harsh new regime. While commercial auctioneers continued to ride high in the early spring, residential auctioneers floundered. At Willmotts’ March sale, the West London firm struggled to raise £2.074m, with just 37% of the 72 lots on offer selling. One week later Hillyers endured a similarly rough ride at the Hotel Russell, WC1, as 35% of the 77 lots on offer sold to raise £1.222m. The fragility of the sector was chillingly demonstrated at Willmotts’ May sale when auctioneer Vic Herrington had to endure selling only 25% of the 96 mainly residential properties on offer. Nevertheless, residential investments continued to attract the market and in the northern provinces the still-rising residential market ensured encouraging results for those auctioneers trading in the region. However, with the slowdown in even these provincial trends, property auctioneers across the country — to a greater or lesser extent — are bracing themselves for a long slow summer.