Property Auctions News posed some questions to Toby Limbrick – director and auctioneer here at Network Auctions. Dive into insights on Recent Sales, Short-Term Outlooks, Risks, Challenges, and much more in the following discussion.
What insights can you provide regarding trends observed by Network Auctions within the residential sector throughout the first quarter of 2024?
The 2024 market is much busier, we’ve listed 28% more lots this year compared to the same period in 2023. That translated into a 35% uplift in the amount raised at our February auction compared to the 2023 sale.
Could you outline some notable sales that gone under the hammer this year at Network Auctions this year?
Refurbishment projects in the sub £100,000 price range are hot right now. A couple of examples…
A freehold terraced house in Newport, Gwent requiring complete refurbishment was guided at £55,000+ and had a reserve of £60,000. We sold this on 8th February and had 11 bidders, 70 bids with an auction sale price of £113,500.
Another short lease flat (65 years unexpired) in the popular area of Margate, Kent needed cosmetic refurbishment and had a guide of £85,000 and reserve of £90,000. There were 4 bidders, 12 bids and our team sold the property (also on 8th February) for £110,000. Interestingly, the buyer made 2 “jump bids” of £5,000 in an attempt to dislodge their competing bidders.
Interesting, could you explain what auction “jump bids” are?
It’s when a bidder makes a higher bid than the usual increment in an effort to “blow out” the competition. In this instance the increments were £500, the bidder made 2 jump bids of £5,000. The second of these bought the property.
What are your forecasts for the property auction market for the remainder of 2024 and into 2025?
We expect a strong 6-7 months of trading with the election suppressing demand from late summer. We predict 2025 will be a bull market with pent up demand from end users washing through, less stock and upward pressure on prices.
From your perspective, what are the primary risks and challenges currently impacting the auction sector in the medium term?
The interest rate hikes in 2023 diluted demand from owner occupiers / speculative investors and narrowed the market to seasoned / professional buyers. They recognised a buying opportunity. As interest rates ease we’ll see the general public returning to the scene.
The Leasehold Reform Bill has undermined the ground rent market. In the low interest rate period buyers were paying 15-20x ground rent income for freeholds, the pending legislation has diluted demand to 8-10 x. With even greater uncertainty surrounding reversion values, we expect sellers to postpone sales until the wording of the Bill is determined.
What are your thoughts on the impending performance of the commercial auction sector this year, particularly in segments like office and retail?
Commercial transactions account for circa 20% of our turnover but demand for commercial property is robust.
We sold a freehold mixed use building (ground floor retail with resi uppers) in Ascot, Berkshire. It was guided at £419,000+ with a reserve £425,000. Network Auctions also sold this on 8th February for £511,000 (we had 3 bidders and 46 bids in total).
Have you identified any discernible geographical patterns or trends in recent years?
The current hot spots are the North West, particularly Greater Manchester and the Midlands with a focus on Birmingham. Properties in those areas generate significant interest resulting in multiple bidders per lot.
How do you assess the prevailing macroeconomic climate and its potential implications for both the residential and commercial auction sectors?
Falling inflation will put pressure on the BoE to reduce interest rates, we predict a base rate of 4.5% by the end of 2024. As buyers return to the market residential property prices will rise but we don’t expect significant gains until 2025 because of the general election.
Considering the shift to a higher interest rate environment, how has the auction sector and its broad buyer profile adjusted?
Our buyer profile shifted from end users to professional buyers – investors / developers / landlords.
What are your perspectives on the potential implications of a Labour government overseeing the economy for residential property investment and development?
Traditionally, the property sector fares well under Labour. If elected, it will be interesting to see what their approach is to the PRS. If they follow the devolved administrations in Scotland and Wales down the road of adverse regulation and rent control we’ll see even more landlords selling up.
