The auction success rate for London has dropped more than 8% year on year for the three months to the end of April, bringing it into line with the UK as a whole.
The combined commercial and residential success rate for the capital dropped from 82% to 75.2%, according to the latest figures from Essential Information Group. The UK success rate for the same period remained the same as a year ago at 76%.
The success rate for London residential dropped from 81% to 74.3%, with the total raised over the three months reaching £237m (2016: £280m).
Gary Murphy, a partner with Allsop residential auctions, said: “Over this period, the London market overheated in certain locations and price brackets. There has also been oversupply of new-build stock in some areas.
“Investors have been looking to the regions for better growth prospects and higher yields. On top of all of this, due to temporary political and economic uncertainty, voluntary sellers aren’t selling for the time being,” he said.
Residential lots offered in the capital dropped by 13% to 705 but lots sold dropped more sharply, by 20% to 524.
Auction House London’s auction manager Jay Howard said the market had changed since the Brexit vote, and in particular the triggering of Article 50 at the end of March for Britain to leave the EU.
Howard also said the snap general election was affecting buyers by adding to the uncertainty. “It could affect the next couple of [AHL] auctions,” he said.
“I have seen values drop recently and it is down to affordability. People are moving back home to save up for a deposit. It will be healthy for the market if it continues,” he said.
The average success rate for commercial lots in London fell by 10.8% for February-April, from a particularly high 94% for the same period in 2016 to a still respectable 84%. The total raised fell from £41m to £32m.
Richard Auterac, chairman and auctioneer at Acuitus, said the issue is about lack of supply of rather than lack of demand. “There is not sufficient stock to satisfy demand. Yields are lower and sale rates significantly higher for London investment than elsewhere in the UK, and recent sales have been a clear demonstration of this,” he said.
“There is no evidence to say that investors’ love affair with London has abated. For non-UK investors, the first and sometimes only port of call for their funds is London.
“One of the predominant reasons for the lack of supply through the auction rooms is that existing London Investors have confidence in the capital to deliver good income returns and long-term capital growth, so why should they sell if they can’t do better?” Auterac said.
“Also, the auction industry has not been able to demonstrate to all owners that sales of investment-grade assets to private investors can achieve the best results if they are openly and professionally marketed,” he said.
Duncan Moir, partner with Allsop commercial auctions, said: “There are signs of a pause in the market, given the impending election and the recent strength of demand in London – certainly for commercial investment stock – and aspirational pricing can lead to a slight softening in success rates. As always, correct pricing ensures a greater chance of a sale.”
Declining results ‘reflect wider market’
Monthly figures from Essential Information Group show that the total raised at auction in April fell by 11% to £215m compared with the same month last year.
Managing director David Sandeman said: “Some 111 auctions were held across the UK last month, 28 fewer than in April 2016, so it is perhaps unsurprising to see falls in both lots offered and lots sold, down by 9.5% and 8.6% respectively.
“The amount raised [at auctions] also decreased, from £242m in April 2016 to £215m in April 2017 – an 11.3% drop.
“This decline in activity reflects what has been seen in the wider estate agency and lettings market, and with the current uncertainty surrounding the General Election and Brexit, it may continue in the immediate future,” he said.
David Callaghan
