edited by Catherine Wheatley
The value of property sold in the three months to June room is up 60% on the same time last year, confirming the turnaround first suspected in March.
According to the latest figures produced by Jones Lang Wootton’s Auction Results Analysis System – based on the results of London’s top firms – the amount of money realised has increased from £38m in the second quarter of 1995 to £61m this time. This follows a 46% improvement in the first quarter.
Richard Auterac, head of auctions at JLW, said that falling gilt yields – now at 8.2% – are making property seem a relatively attractive investment.
The ARAS yield, at 10.6% against 10.9% in the first quarter, indicates a better return on buildings bought in the room.
He added: “What we are seeing now is a buying spree. Gilt yields are now at a level where investors feel comfortable about buying property. The difference beween gilt and property yields represents the risk premium.”
Auterac was optimistic that the latest recovery would be sustained for longer than the mini-boom at the start of 1993, when gilt yields were at 8.5%.
“The last boom was fuelled by low gilt yields, but this time there is also the expectation of rental growth,” he said.
Average success rates climbed from 71% to 75% during the period, confirming that buyers’ and sellers’ price expectations are moving more closely into line. The average lot size leapt from £90,000 to £138,000, swelled by Healey & Baker’s June sale of Lloyds Bank sale-and-leaseback property.
Duncan Moir, auction partner at Allsop & Co, said that the firm’s sales were up £10m on the same time last year. He added: “Revaluations have unwound in the past six months and people are beginning to deal again.”
During the period the retail sector showed most improvement. The value of property sold was up 126% to £43m, while the average lot size moved from £73,000 to £149,000. The average yield moved in from 10.9% in the first quarter to 10.6% .
Auterac said: “Retail yields will continue to harden. There is a great deal more demand for prime pitch, which will have a knock-on effect in the secondary market.”
Healey & Baker auctioneer John Townsend said: “It is evident that retail is the first area where investors expect the recovery to take place.”
Other sectors fared less well. The value of office property sold was down 25% to £3m, while the yield moved out from 10.7% to 11.1%. Industrial lots made £8m, up from £6m, accompanied by a 0.2% yield improvement, to 11.7%.
