Residential Auction
Market
Overview
This year started on a high note with our January auction which brought a noticeable uptick in private investor buyer activity. This renewed interest could be directly linked to heightened expectations of an impending decrease in interest rates, which had been forecasted to take place this year together with the offering of national well priced property opportunities on offer.
The anticipation of more affordable borrowing costs undoubtedly acted as a catalyst, sparking a wave of enthusiasm across the buyer spectrum, clearly reflected in the vigorous bidding and acquisition activities observed at our residential auctions early in Q1. However, the tail end of the first quarter brought with it a tempering of expectations. Confidence in the likelihood of an imminent downturn in interest rates started to ebb, giving way to a more measured approach and perhaps more realistic outlook as we progress into Q2.
The market has had to reconcile with the growing realisation that the anticipated rate reductions might not materialise as soon as hoped, or indeed expected by many property professionals.
January - April 2024 Highlights
Lots offered
Lots sold
Average success rate
Lots over £1M
What is selling?
In the face of these shifting economic signals, most auction buyers have strategically pivoted their attention to assets with the potential for higher returns. There has been a pronounced demand for Houses in Multiple Occupation (HMOs) and high-yielding residential properties, including blocks, houses, and flats. This trend underscores a clear preference for investments that can deliver robust income streams, which is particularly crucial in a landscape where the future of interest rates remains uncertain.
Furthermore, there is a sustained interest nationally for unmodernised houses and flats. The allure of these properties comes from their competitive pricing, which has proven effective in attracting a widespread and diverse audience of national buyers. Such assets represent an opportunity for value add through refurbishment and redevelopment, appealing to both individual investors and professional developers alike.
Ground Rents Market
Contrasting with the buoyancy in some subsectors, the freehold ground rent market has witnessed a noticeable contraction in terms of pricing. This segment has seen a decline in the availability of assets, alongside a narrowing of the buyer groups actively participating in this space. The changes can be attributed to the outcomes of recent government consultations, which have had a tangible impact on the sector. The resulting environment is one of caution and recalibration, as market participants navigate the new regulatory landscape and reassess their investment strategies - to read more about changes to Ground Rents see our detailed analysis at:
Allsop Auction Highlights
Against this backdrop, Allsop Residential Auctions has carved out a position of strength in Q1 2024. The Firm has experienced a surge in auction activity, eclipsing the transaction volumes that were recorded in Q1 2023. This uptick in activity has been principally driven by an increase in instructions emanating from Asset Managers and Housing Associations. These entities have turned to the auction market as a platform for the efficient disposal of assets, a move that has contributed significantly to the vibrancy and liquidity of the market.
The performance metrics for Allsop Residential Auctions over the first financial quarter are in contrast to the broader market's health. With a total of 577 lots sold across three auction sales, Allsop has set a commendable pace for the calendar year ahead. The auctions have not only been successful in terms of volume sold but also in achieving an impressive average success rate of 87% (industry average 73.1%- source EIG). The comparative number of lots sold Q1 2024 against Q1 2023 shows an increase of 78%.
We have sold 18 lots over £1M in Q1 2024, compared with 14 lots over £1M sold Q1 2023, and three lots over £3M+. (See examples below) The most notable of our data recorded this quarter is the increase of approved registered bidders; 4,641 - Q1 2024 compared with 1,129 registered bidders Q 1 2023. This represents a 312% increase of registered bidders compared to the same period of last year.
Q1 2024 Largest Lots
Lot 216 - February 2024
Exton House, 4 Second Avenue, Hove, East Sussex, BN3 2LG
- INVESTMENT - Freehold Detached Grade II Listed Building
- Arranged to provide Eleven self contained Flats, each subject to an Assured Shorthold Tenancy
Sold prior in the region of £4m
Lot 294 - March 2024
75 Greencroft Gardens, South Hampstead, London NW6
- VACANT - A Rarely Available Freehold Well Located Semi Detached Building in need of extensive modernisation.
Sold prior in the region of £4m
Direction of travel
As we move further into 2024, the Residential Auction Market continues to be influenced by both micro and macro-economic indicators and sector-specific trends, in addition to both domestic and international political influence. The market currently remains agile, with investment strategies being continuously refined to harness opportunities and navigate challenges. The positive, looking ahead, is that interest rates are unlikely to increase which provides certainty for investors and developers alike for the remainder of 2024.