COMMENT August is usually a quiet month for the auction market, with auctioneers taking a well-earned rest before the final part of the year starting usually in October.
But this year Covid has had a profound effect on the market, with the widespread use of online auctions to bring properties to the ever hungry auction buyers.
According to the latest Essential Information Group newsletter, 24 auctions were held across the country in August, with 453 properties selling out of 626 offered, realising a remarkable £74m.
And continuing on into September, the two principal commercial auctioneers, Allsop and Acuitus, collectively offered 131 properties, selling 107 for a total of £67.3m, an average of £629,000 per property.
Between them, their catalogues offered 195 lots but 64 were withdrawn prior.
I have previously reported the ease with which auctioneers can now advise their clients to withdraw properties when there are no registered bidders, thus improving their percentage success rates. But even so, the 82% recorded between them still demonstrates the ongoing demand from investors to secure a safe home for their money.
Interest rates for savers continue to fall and NS&I just this week slashed its rate from 1% to a paltry 0.15%, which clearly demonstrates that investors are desperate to find suitable alternatives where their return will be far more respectable.
The recent changes to the planning use classes will also help buyers’ confidence as they can now convert shops into cafes restaurants without the need for planning permission, which, once the restrictions of Covid are lifted, provides a good long-term option down the line.
Allsop
It was good to see that lots with a price tag of more than £1m were still being offered and selling well under the virtual hammer. Allsop sold six £1m-plus lots on the day, with the highest being the £3,065,000 realised for lot 34, a freehold office building in Crescent Road, Worthing. Let to a limited company for a term of another 11 years at a rent of £225,000 pa, the price achieved showed a gross return of 7.3%. It was guided at £2.6m-£2.7m.
The next largest lot was lot 5, in West End Lane, Hampstead, NW6. A freehold retail and residential investment let in part to Headmasters the hairdressers and three flats above let on ASTs at a total rent of £89,957 pa, it was guided at £1.3m-plus, but sold for £2,015,000, a gross return of 4.46%.
And lot 15 in Honeybourne in Evesham also sold well. Situated on the Honeybourne Retail Park, it comprised two retail units with the larger one let to the Co-Op at a combined rent of £70,000 pa, it was guided at £1.1m-£1.2m and sold for £1,425,000, a gross return of 4.91%.
The auction raised a total of £42.9m.
Acuitus
The following day, Acuitus fared just as well, realising £24.4m from the sale of 37 properties.
Of these, seven had a lot size in excess of £1m, with the largest being lot 10 on Golders Green Road, NW11. Let to retail tenants on the ground floor and four vacant self-contained flats above at a total rent of £42,500 pa, it was guided at £2m-£2.25m and sold for £2.1m, a gross return of just 2% but with the upper parts vacant.
Also of note was lot 5 in Mill Hill, NW7, let to a chemist on the ground floor and with two self-contained flats above let on ASTs at a combined rent of £60,000 pa, it was guided at £950,000-£1,050,000 and sold for £1,231,000, a gross yield of 4.87%.
Lot 6 in Coombe Lane, Raynes Park, SW20, also sold well. A freehold retail and residential investment, it was let at a combined rent of £122,700 pa. Guided at £1.75m-£1.85m, it sold for £1,775,000, a gross return of 6.9%.
Looking ahead
Both auction houses will now be frantically trying to fill their books for the next round of sales in October, but what online auctions have shown is that providing you can source a steady stream of saleable properties to offer and have the resources available to process them, there is an increasingly eager market prepared to absorb them.
The real question will be whether online auctions, having become the norm and being so well established, will replace the more traditional live ballroom auctions we have become so used to.
I sincerely hope not.
John Townsend is head of the auction advisory service at Harold Benjamin Solicitors
