Essential Information Group’s (EIG’s) August market update showed a 22.7% increase in overall lots offered to 1,738 compared to August last year, while sales increased by 15.3% to 1,113.
The value of residential sales grew by 13.5% year-on-year to £157.7m, while commercial sales grew by 20.5% to £14.1m.
Auction activity by region
In the three months to August, the North West stood out with sales up 14.6%. Yorkshire and the Humber saw a sharp 41.8% uplift in amounts raised, driven largely by residential demand, while the East Midlands and the West Midlands also showed double-digit increases in capital raised.
The North East and Wales experienced significant declines in activity, according to EIG’s data.
£2.5m paid to help broker clients benefit from greener homes
Sponsored by Halifax Intermediaries
Investors spending wisely
The percentage of sold properties in August, however, fell by 6% year-on-year to 64%, as investors held back for the most desirable properties and “spend their money more wisely”, according to auction experts.
Guy Nyirenda, head of commercial and specialist lending at Altura Mortgage Finance, said: “Sellers have been unrealistic with their price expectations for standard and auction sales.”
But this, he said, was changing and had driven more activity in the market.
“My investors have been waiting for the market to pick up – more availability of lots and more realistic pricing before buying at auction. Previously, there hadn’t been enough stock available, not just of distressed properties but of properties investors can add value to,” he added.
Nyirenda and his team are seeing a lot more investors buying auction properties to hold them longer term as buy to lets (BTLs) rather than buying to refurbish them and sell them on.
“They’re interested in properties that can be turned into HMOs to increase revenue,” he added.
Gareth Lewis, deputy chief executive of specialist lender MT Finance, has seen a similar shift in investor behaviour and has noticed a rise in the number of bridging borrowers converting their loans to a BTL mortgage.
“They’re taking a more rounded approach to their assets rather than just growing their portfolio size,” he said.
Lewis noted that as rents were rising, investors were searching for assets that would not only go up in value but that would generate income while looking for ways to protect themselves against void periods.
“Investors are taking more stock of location; for example, looking for properties near schools or transport links. They’re more aware of what makes a good asset and are spending their money wisely,” he added.
A strong supply of keenly priced finance was also supporting the market, said Nyirenda.
“The majority of properties are bought using bridging or private equity. That’s a huge market and it’s not showing any signs of abating any time soon. There’s a lot of finance to be deployed.
“The cost of finance has dropped significantly in the last six months. Competition among lenders is partly behind this, but following the base rate cut, the cost of funds in the market has also dropped. Although there isn’t a direct correlation, it does have a wider impact on the market,” he said.
