A wave of companies relocating to Cambridge simultaneously is bringing an increase in wealth and a level of property investment previously unseen in East Anglia.
This influx is being led by pharmaceutical giant Astra Zeneca, with the likes of Amazon, Spotify, Google and others hot on its heels. Often overlooked as an investment location, East Anglia has proved to be at the heart of the UK economic recovery, a fact reflected by the region’s property sales growth.
While employees of these companies might not purchase at auction, we are seeing a ripple effect on prices in the regions, and property auctions are now better attended than before.
East Anglia has a varied market, with yields fluctuating throughout the region. While Cambridge remains the most popular area for investment, Bury St Edmunds, Ely, Newmarket and Saffron Walden all continue to attract interest.
The Cambridge market appears to have the perfect storm of a variety of buyer types, coupled with a lack of available stock. All of this means that prices have soared by 50% over the past six years.
Commercial lots throughout the region appeal greatly to auction buyers. As the stock market continues to be volatile, commercial property investment remains strong. In parts of East Anglia, mixed-use investments can offer yields up to 15%, as well as significant capital growth.
This is owing to good transport links between London and the region and to the numbers of large-scale businesses that operate locally. Demand has also increased for office buildings because of recent changes in permitted development rights for these properties.
Development opportunities across East Anglia are becoming harder to find and are increasing in price, with recent sales of sites equating to around 50% of GDV. Buyers are increasingly having to purchase the land and then rely on the market to rise over the time of the build to generate a profit margin.
Public bodies often favour a sale by auction, as the transparent bidding process enables them to prove best price has been achieved. We have acted for a number of public bodies as they evaluate their property stock, and these well-organised clients see great value in disposing of certain properties though our auctions. But we have seen more public bodies look to cash in on their assets in recent months.
For example, we recently sold a former police station that had planning permission for two homes. The lot attracted a huge amount of interest from property developers and ended up selling for £80,000 above its guide price.
The popularity of these sites underlines the scarcity of opportunities like this, and helps to generate the premiums that developers are willing to pay to secure such schemes. The police station site in particular prompted some fierce bidding and scores of pre-sales enquiries.
Building plots and refurbishment opportunities in East Anglia are becoming increasingly rare, so prices for lots such as these are soaring.
Buy-to-let investments were particularly sought-after in our March sale, as investors aimed to purchase before the 1 April increase in stamp duty to 3% for buy-to-let investors and second-home buyers.
For example, a one-bedroom buy-to-let flat in Bedford sold for £40,000 above its asking price after 60 viewings. However, the buy-to-let market appears to have quietened in the wake of the stamp duty hike.
Cuts to the tax relief landlords can claim on mortgage interest payments, which are due to come into practice from next year, will also hit mortgaged property investors. Despite this, I believe the market will weather the storm and soon be up to its previous levels as people continue to see property as a sound investment.
We have seen a surge in sales and prices achieved across all property types. We have a wide range of vendor types, including private owners, charities, executors, housing associations, councils, public bodies and many more, and we suspect that this will continue to grow as people see the value in selling their assets at auction.
The results achieved across each of our auctions over the past months reflect the scarcity of good property opportunities in desirable locations and have confirmed the premiums that people are willing to pay.
Ian Kitson is a property auctions associate, Cheffins
