Cash is king in commercial auction rooms

Four out of every five buyers at Allsop’s commercial auctions now pay with cash, as high street clearing banks withdraw from the smaller-scale investment loan market. The proportion of cash investors (80%) is the highest recorded in the Allsop Summer Review since the firm introduced its buyers’ survey at the point of exchange in 2012. In 2016, the number of cash buyers was 69% of the total, around the average for the past five years. The statistics do not include people who secure finance after making a purchase. “This could reflect an increasingly tougher lending environment,” the report says. As the high street clearing banks restructure their operations in response to the new ring-fencing rules designed to protect retail deposits, their appetite for smaller-scale property lending has significantly reduced, the report says. In the auction room, “cash is still king” the report says. “There seems to be no limit to the amount to be invested; we ask ourselves whether the money flowing into the market would historically have gone into the equity or bond markets. Alternatively, investors may be switching from the residential market as regulations and costs tighten in that sector.” The majority of buyers in the room have bought at auction before, up from 59% in 2012 and 83% in 2016 to  86% this year. They are increasingly looking for opportunities outside their “home region”, up by 5% to 63%. The intention of purchasers to buy again at auction within the foreseeable future remains high at 80% (78% in 2016). More than 50% are looking to invest more than £500,000 in a single property, while 27% are looking for £1m-plus investments. Around 20% of the lots sold by Allsop this year have been sold at prices at and above £1m. Allsop has raised £351m at its commercial auctions so far in 2017, down slightly from the same period last year (£367m) but still significantly up on 2015 (£278m). It sold 556 lots at its February-July sales and achieved an average success rate of 85%.