It is pleasing to report that the market for the disposal of commercial and residential property by auction in the north of England is alive and well.
As head of a national auction house, with a strong presence in the North West and North East, I am happy to report that demand for property in the North of the country, in all sectors, has been steadily increasing since October 2012, which is a meaningful six-month period upon which to base this opinion.
Growth has been fuelled by increasing numbers of investors having cash liquidity, access to limited borrowing and, in the residential sector, a substantial choice of buy-to-let mortgage products.
Similarly, bank lending has improved, with some now prepared to lend, largely to established clients. But the willingness of such customers to use substantial amounts of their own capital is breeding a renewed level of measured confidence.
Even an inexperienced investor can see clear evidence that, on average, higher prices are being achieved in the Northern sales rooms than were evident 12 months ago, giving ample reason to buy now on a gently elevating market curve.
Although investors are likely to remain cautious with their hard-earned cash and equity for some time, they are now visibly active, targeting stock offering rental returns between 7% and 10%, built-in equity for the future or with some potential to add value.
Recent analysis of auctions by Essential Information Group for the period from October to December 2012, supports our view that the north of England has experienced an increase in the number and percentage of properties sold and proceeds generated, indicating moderate rises in values in both the residential and commercial sectors.
In the North East, historically a challenging area for investment, the total raised for the fourth quarter of 2012 increased by 10.8% to £46m, compared with the same quarter in 2011.
Meanwhile, revenue in the Yorkshire and Humber region rose by 17.5% to more than £65m. In both regions, the upturn has been visible across almost all sectors of the property market.
The North West, however, showed no increase over the same period.
Much of the stock offered at auction in the North is not a prime, blue-chip, covenant-driven commercial opportunity.
Many properties come with all manner of physical problems, including title or access issues, uncooperative tenants, boundary disputes and unfinished construction.
In the current economic climate, most banks have recognised the value of auctions for the disposal of distressed stock, largely comprising portfolio sales under receivership or in administration, to reduce debt levels.
I have found from experience that in nearly every instance, enhanced realisations have been achieved by breaking up portfolios rather than selling them to a single buyer. In some cases, purchasers have acquired portfolios and then broken them up for profit.
There is no doubt that this strategy has offered the banks a robust, reliable and transparent process that has crystallised the liquidation of property assets affected by toxic debt.
I can quote the example of a mill in West Yorkshire converted into five “shell” workshop units that had been on the market as one property. However, after splitting up the properties, they sold individually for a total of £255,000, an increase on a previously agreed price.
Also in West Yorkshire, a residential development site with planning permission for five town houses and potential for a further six detached houses on a site of 1.6 acres, which had been on the private treaty market for over three years, sold in the room for £448,000, following a short marketing period. The initial guide price was £350,000-plus.
Let’s hope that 2013 will show continued positivity in the auction rooms across the north of England.
Tony Webber is head of auctions at Eddisons
