More and more local authorities are choosing to use auctions to raise cash from their property assets, both built and land.
Every UK local authority is under pressure not only to cut costs but also to maximise revenue. An empty piece of land or an office building that is no longer in use is now a liability – but one that can be converted
into cash quickly in the auction room.
What auction buyers can expect to see being offered on the day is surplus local authority stock, much of it needing significant improvement, that is realistically priced and in demand.
At a stroke, in property time scales, the local authority has converted what it may have viewed as an increasing liability into much-needed cash.
Another attractive development is the sale of properties via local authority empty homes schemes. This not only benefits the local authority that no longer has the cash to compulsory purchase blighted properties. The purchasers bring them back into habitable use, thus helping to ease the housing shortage and also shoulder the burden from the previous owner, who might not have had the financial resources required to modernise the property.
Whether brought back into use for personal use or as a buy-to-let, the end result is the same: another property back into habitable use and available for occupation.
Local authority stock is perfect auction fodder, and CPBigwood has been appointed auctioneer for most West Midlands authorities, including Birmingham, Sandwell, Wolverhampton, Solihull and Walsall, with ad hoc lots from Wyre Forest and Dudley.
Southern investors are increasingly showing up at Midlands auctions looking for bargains. We are seeing new faces and when you talk to them you often find there is a South East connection.
A quick glance through any catalogue reveals the reason – higher yields and lower property prices offering better value for money.
Prices are through the roof in London and the South East in both the commercial and residential sectors. As a result, canny investors have begun to question continuing to put their money into the capital.
We are seeing auctions absolutely packed out, with people barely able to get into the venue and the hammer often coming down on bids well in excess of the asking price. Local property groups have made excellent returns from working the market. Now southern investors want in on the act.
They will often pay somewhat over the odds, but that is because, in their terms, returns are typically 8-9% rather than the 4-5% in the capital. From their perspective they are getting a better deal, so it is a win-win all round.
Birmingham’s property reputation is also booming on the back of a thriving local economy. Jobs are being created in their thousands by bank back offices and the likes of Jaguar Land Rover switching out of the capital. Construction activity is high, and retail buoyant.
Investors see so many new buildings going up in the city centre, including Snow Hill, the Paradise Circus redevelopment, Arena Central, the Mailbox reinvention, and the New Street Station makeover that includes a John Lewis store. They see institutions snapping up these projects, sometimes ahead of completion.
These are the elements, plus the prospect of HS2 high speed rail shortening connection times, that are encouraging southern investors to assess the opportunities available at Midlands auctions.
The latest results from our 2 July auction reflect this trend. Some 123 lots went under the hammer, achieving £14.2m in sales, representing an 87% success rate.
The previous record – £13m set on 27 February, 2014 – has been broken by every auction so far this year. On 26 February we raised £13.4m, a total that grew to £14.8m on 30 April, and then we have the July result.
The aggregate sales total of £42.4m so far in 2015 is more than we achieved in one year just five years ago.
Rory Daly, senior partner, CPBigwood Chartered Surveyors and Auctioneers
