Diversity of the auction audience is widening

COMMENT: At our February residential auction, we conducted the most comprehensive analysis of buyers in the auction room to date, writes Allsop head of residential auctions Gary Murphy The results revealed a wealth of information about today’s auction market, dispelling age-old myths and providing a valuable insight into current market confidence. These findings also reinforce the growing prominence of the auction room as an effective and mature purchasing platform and its widening appeal, cementing it as an integral part of the property marketplace. Auctions can attract a wide variety of buyers, which is one of the key reasons vendors have traditionally chosen the auction room to dispose of complex assets or investments for which there is no obvious buyer. Our analysis of buyers at February’s auction reveals that the diversity of this audience is widening and that there is a growing number of first time auction-goers. Almost one-third of all buyers stated that they had not purchased at auction before. Upon speaking to one of them, it was explained that the transparency of the purchasing process appealed, having been let down by agents previously. Others stated they enjoyed the competitive bidding process, which is open and quick.    On the day we saw a real demographical mix, from young families buying their first home to investors of all ages and nationalities. Owner-occupiers accounted for at least 8% of all buyers in February which, while low, dispels the myth that the auction room solely attracts investors. Approximately 92% of buyers surveyed purchased their property as an “investment” and 74% were planning to hold their investment in the long term, shattering the “Homes under the hammer” perception that auction buyers purchase to sell. In today’s market, those with the means and appetite are more likely to buy to rent, despite the tougher taxation and mortgage regulation buy to let investors face. Brexit also failed to dampen demand among buyers on the day. Those surveyed expressed little concern about the impact of Brexit or indeed future market falls – a sentiment that chimes with the business as usual atmosphere felt at MIPIM earlier this month. Almost four-fifths (78%) of buyers stated they had examined the legal pack, viewed the property and checked their finances before bidding – demonstrating how motivated buyers can reduce risk and carry out their due diligence. Nonetheless, while purchasers carried out considerable preparation prior to entering the auction room, this did not prevent 27% of surveyed buyers bidding higher than they thought they would. As a result, with lots that are sensibly and competitively priced, the auction room retains its unique ability to give sellers a combination of price and speed that cannot be matched. The growing maturity of the market is also reflected in the increasing number of high value residential lots sold by Allsop over the last 10 years. With 99 sales in excess of £1m last year, 118 in 2016 and 90 in 2015, large numbers of lots sold at £1m+ has become the new normal. Changes in the auction market are not limited to value, but also to asset type and location. One of the most significant trends of the last three years, is the demand and volume of lots with permitted development rights. We are also seeing a growing number of new build homes offered at auction. While there has been consistent interest in London assets, investors motivated by the prospect of higher yields, assets further afield have become increasingly sought-after. In line with this, our catalogues are characterised by a far more geographically diverse spread of lots, befitting the diversity of buyers that now frequent the auction room. February’s buyer analysis and strong auction results offer a revealing snapshot of the residential market. Although these findings indicate that buyers at auction are yet to be deterred by market and political headwinds, future results and further analysis will reveal how the market responds in the longer-term. Auctions are an established component of the property market. A far more accessible and mature offering than it once was, auction is a powerful route to market for vendors, and for buyers it is a quick and transparent way to purchase a property. Gary Murphy is a partner, residential auctions, at Allsop