Amid the glitz and glamour of Cannes, remember the humble auction

COMMENT The arrival into Nice Côte d’Azur Airport must be one of the most stunning landings in the world. That final descent, which makes you feel as if you’re within touching distance of the Mediterranean, is not only thrillingly beautiful, but almost seems to promise that the next few days are going to be effective ones. Many in the property industry will be making that journey as they arrive in the South of France on their way to MIPIM. That international bastion of the sector – where chance encounters with people you haven’t seen in 10 years happen every five steps, and new connections are made – has returned. MIPIM is undoubtedly an important opportunity for the sector to come together and make deals. It is a good thing for our industry that it is back. But the world has changed since the last “real” MIPIM in 2019 and it will be fascinating to see what big themes emerge as a result. It will be equally as fascinating to see whether MIPIM remains the deal-making and investment-driving force it has traditionally been. Sea-change Of course, MIPIM hasn’t been the only investment-driving force disrupted by the pandemic. The world of auctions has likewise seen a sea-change in how we operate, with online auctions likely to remain in some form – albeit with a hybrid element or in addition to in-person sales. Much like our private treaty colleagues, we auctioneers still love to press the flesh and, in our case, bang the gavel. However, unlike the Cannes event, auctions have remained a resilient method for transactions to continue to flow throughout the past couple of years. That is especially true for the evergreen residential sector. The macroeconomic conditions that influence investments are, on the face of it, not favourable. Although the pandemic seems to be in its final throes and restrictions have become mere guidelines at home, there are of course new factors at play, from the horrific recent global events to the impact of higher interest rates. Inflation is at a 30-year high and house prices continue to surge. For auction buyers, most of whom are cash buyers and therefore are not overly concerned with finding a deposit or with ever-growing mortgage interest rates, these challenges can serve to encourage, not halt, investment. It is why, despite interest rate rises and perhaps because of inflation, we have not yet seen a significant impact on the market from the buffeting winds around us. Residential property, especially when it features some commercial or a mix of uses, will always be an attractive and stable investment. While this is especially the case in emerging sectors such as build-to-rent and purpose-built student accommodation, it remains true of the tried and tested buy-to-let market too. Buy-to-let investors have traditionally chased “total return”, namely a blend of capital growth and rental yield and, with London as the notable exception, have enjoyed the return of both over the past two years. Meanwhile, we are beginning to see London rental growth creep up and the market normalise. All of this means, while favourable tax concessions for buy-to-let landlords have been phased out in recent years, the market for assured shorthold tenancy investments remains strong for the foreseeable future. Foreign investment Although the government seems to blow hot and cold on measures to attract foreign investment, we are still seeing international money flowing into the UK via auctions. At Allsop’s most recent residential sale, for example, the two final bidders for one of the lots were on opposite sides of a continent, participating virtually from Mexico and New York. This demonstrates the continued attractiveness of residential property in the UK and how quick, effective, and lucrative it can be to buy at auction. Residential property can be a stable investment in a time of global turmoil and economic fluctuation – especially for those looking to shield their cash from inflation. While the newfound glitz of sectors like BTR and PBSA is likely to be among the hot topics at MIPIM, investors of all backgrounds would do well to remember the humble auction when considering how to deploy, and maximise the impact of, their cash. Because while MIPIM attendees will be clutching countless business cards as their flight takes off over the glistening Mediterranean, auctions remain not only an excellent avenue for property investment, but the best way to invest cash quickly as a steady ship in the storm. Richard Adamson is a partner at Allsop