For better, for worse National statistics obscure a diversity of regional stories, so Estelle Maxwell gets the local lowdown on last year’s figures from top regional auctioneers and asks about key challenges in 2010
For residential and commercial auctions, 2009 was less of an annus horribilis than the year before, as the slump in property spending slowed. It slipped a relatively gentle 9% to £3.5bn, compared with the 36% plunge to £3.8bn in 2008.
The latest National Auctioneers League Table, compiled exclusively for Estates Gazette and based on Essential Information Group data, showed an 11% rise in commercial sales last year to just over £1bn (16 January, p52).
This marks the first sign of a resurgence in activity that began in the second quarter of 2009, following a dramatic 54% decline in 2008.
However, the continuing shortage of prime stock, a weak secondary market and low levels of lending reduced sales at most commercial auction firms last year.
The exception to this trend was Allsop’s commercial arm, which increased its market share from 33% to 44% with sales of £445m in 2009.
Allsop also led the residential league table by raising £327m in 2009, although this figure represented a 17% fall in revenue on the year before.
Sales of residential property fell 16% nationwide over the year, raising £2.4bn – compared with £2.9bn in 2008 – as the anticipated deluge of repossessed homes failed to happen.
Big fluctuations in results across the 12 regions covered by EIG painted a diverse picture of pricing and buying trends; they ranged from a 21% fall in revenue at Eddisons Leeds auctions in Yorkshire & the Humber, to a 41% rise at Scotland’s SVA Property Auctions.
EG spoke to the leading regional performers to learn the story behind the figures and discover the main challenges facing firms in 2010.
London
Duncan Moir, commercial auctioneer at Allsop The data clearly shows that the investor’s market is still centred on London. Our 44% market share and 45% uplift in receipts was helped by the fact that we did not cancel any auctions and believe passionately in the process.
The appetite for real estate investment is very good but our job is to keep stock coming forward so buyers can look at it and bid comfortably; this will encourage vendors to use the auction room as the principal method of sale for the right product.
South-eastern Home Counties
Kevin Gilbert, auctioneer at Clive Emson We rose to seventh from 12th position in the national league tables, which was a fantastic achievement. This reflected our refusal to include lots in our catalogue unless we felt we stood a chance of selling them, so our success rate averaged 80%.
Our commercial market has been quite strong, but demand has outstripped supply. The market for this, residential and land sites remains very price sensitive.
Buyers will look at something only if they perceive value for money so, more than ever, reserve-setting is key.
North-western Home Counties
Simon Clayton, auctioneer at Romans Volumes have gone down but turnover and profit has gone up, so it has been a positive year.
This year could be the year of the seller, because last year we saw a disproportionate number of buyers chasing a small number of properties, driving the average success rate up to 80% and prices from an average £164,000 to £200,000.
There was high demand for good-quality stock, but stock in poorer locations and secondary product still struggled.
East of England
John Parsons, auction manager at William H Brown (Norwich) A lot of our sales are general market, not distressed stock. We launched less than two years ago, and our results are based on sheer hard work and determination to offer a new regional auction centre in East Anglia.
It has been a positive year. We have seen a lot of property coming to the room because of disillusionment with the private treaty sector and failure to sell; more people have used auction as a means of securing a quick and certain sale.
West Midlands
Rory Daly, managing director and auctioneer at Bigwoods Last year was a bit rocky at the beginning but our May sale marked a definite improvement. Revenues rose fractionally in 2009 and a number of sales achieved prices significantly above expectations. Local council stock was competitively priced and sold well.
Secondary commercial stock was very difficult to sell and, in the buy-to-let residential market, so too was anything below a 6% yield on assured shorthold tenancy. However, the regulated tenancy market was very strong indeed because it has the potential for capital growth.
East Midlands
Graham Penny, auctioneer at Graham Penny Auctions In 2009 we sold almost exactly the same number of properties as in 2008, but receipts were down by 18%. We saw fewer of the higher-value lots at auction because of funding difficulties and lack of liquidity.
We sold much more lower-priced property, predominantly for private clients. We were 20% down on instructions, and less than 10% of the lots were repossessions.
Traders and dealers who are looking to turn stock are not doing so. Interestingly, quite a lot of buyers are coming from London and the south where prices are rising, so they are looking outwards.
North West
Stephen Swainson, auctioneer at Pugh & Co With fewer vendors our revenues have dropped but, because we have a strong corporate background – and corporate and local authority vendors are more realistic on prices – we did reasonably well in 2009.
There is still a funding issue in the commercial sector; those purchasers who can manage to get commercial lending are able to buy in volume at the right price – as long as they can take a personal risk against the equity in their holdings.
Vacant property, retail, industrial and development sites are struggling because of the nature of the further investment required before they produce an income.
North East
Keith Pattinson, director and chairman at Pattinsons Volumes and transactions in the general market were down 30% and 60% over the past two years, so the fact that our revenues fell 8% is not bad.
We have focused on building the business in various ways, holding sales across the country and working with agents who have become less resistant to auctions.
The average price of property in the North East fell by about 15% last year and is now at 2004 levels.
There is no doubt that home information packs discourage people from proceeding with their property sale on a whim, and this has hit volumes – as has the return of negative equity among vendors who paid too much for their stock.
Yorkshire & the Humber
Tony Webber, auctioneer at Eddisons Leeds We had a better 2009 than 2008, although revenues still fell. Last year, private vendors and corporate clients set reserves more realistically than in 2008, when it was unclear where the market was going to go. This time last year it was difficult to sell land with planning permission for flats, and commercial values were down by 40% on 2008.
This year investors perceived there was value for money in property rather than in leaving cash in the bank, so there is a real appetite for investment, particularly in high-yielding, lower-value stock at the bottom end of the market, returning 8-10%.
Scotland
Shaun Vigers, auctioneer at SVA Property Auctions Last year was our busiest for some time, with demand for product and service at every auction. We followed the route of “little and often”, so we held seven sales of 30-40 lots rather than five or six of 50-60 lots, and this paid off.
The outcomes varied from sale to sale, not so much because of pricing but because of levels of interest provoked by different lot types.
Stock that sold well included residential investments, life rents and short assured tenancies that produce income. Anything fresh to market is selling well, but land with consent for two-bed flats is not particularly popular.
Wales
Paul Fosh, auctioneer at Paul Fosh Auctions Prices probably dropped at the tail-end of 2008 and into the beginning of 2009, but after that I don’t think we saw any significant price falls on lower-value property; we are selling more at this end of the market. New faces are coming into the room to use their cash savings, so numbers in terms of volumes are holding up. We have also been very successful on pricing at a time when the market is very price-sensitive, and our success rate averages 80%.
Our average house costs around £58,000, while in the valleys the average is between £40,000 and £45,000, yielding around 10%.
Sales are attracting buyers from all over the country, though now that benefits-financed tenants receive their rents directly through the government’s local housing allowance scheme, we have so far seen only the tip of the problems regarding payments to landlords.
South West
Graham Barton, auctioneer at West Country Property Auctions We have seen an almost insatiable demand for modest residential projects of every size, shape and description. We exchanged on 270 properties this year, compared with 260 last. Lots have sailed out of the door.
Prices have barely fallen. Builders are looking at smaller concepts to keep their teams busy. Also, private buyers with savings doing nothing in the bank have turned to property, investing £100,000-£200,000 for a yield of 10%, and this group has really refreshed the market.
