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Allsop Residential Auction February 2012: Results, Analysis & Conclusions – PropVestment

PropVestment provides a brief but insightful analysis of the results from Allsop Residential Auction in February 2012. We spent some time attending on behalf of a client looking to make a cash investment.

Allsop Residential Auction Headlines

  • 90% success for all lots in London and South East.
  • AST (Assured Shorthold Tenancy) yields over 10% 
  • Northern England struggling
Allsop Residential Auction

90% success rate at Allsop Residential Auction for London and South East

As you can see with the above chart, London as shown by the M25 statistics shows that over 90% auction success with an average price of £324,074. South East and South West also sold well with almost similar success rates however the values were significantly lower.

The worst success was the North East and Northern Ireland. The North East had the lowest success and the lowest average value for the Mainland. This means that this part of the country is the worst effected and the limited activity shows that even bargain hunting investors are staying well way.
The Northern Ireland results could be attributed to problems in mainland Ireland, however with only 6 lots that all sold, the data set is very limited.

Rental yields above 10% , investors market

The main information to be taken from these statistics is that most sales are investments for rental yields, with ASTs demanding lower prices but therefore higher yields. This can be attributed to risk factors.

An interesting stat is that sites with planning permission had a very low success rate, there are buyers there but sellers are keeping a high reserve on these.

CONCLUSIONS

As with previous auction articles like Auctions are for sellers we see similar stats here, majority of lots in London and South East sell well at high prices, however the rest of the market is struggling.
Auctions are for experienced investors and sellers, and not currently for first time buyers. 

*Graphics from www.allsops.co.uk Allsops Residential Auction

Auctions are now for selling rather than buying property

On Monday 6th February 2012 PropVestment paid a visit to Barnard Marcus residential property auction at Grand Connaught Rooms in London. We were in for a surprise as we were there as a buyer but soon found auctions are now for selling.
This was the first major property auction of 2012 in London. Thus it was pack out, many experienced and new property buyers in the hall.

Auctions are for buying not selling now

Lot 1 had guide of £800,000, a four bed house in Battersea, it went for £1.28m + 2.75% fees. This was the story of all the first twenty or so lots.
All the first 23 lots were in London, the average winning bid was over 30% above the guide price, taking out 5 where even at this level the Reserve was not met, the other 18 properties sold at over 36% above guide price.

A few other key high lights from this auction:

  • Most land only deals did not sell, reserve not met
  • A piece of land without planning permission for a possible 8 units went for £860k, that’s insane for the area, almost £110k land cost then planning then construction.
  • Most of the lots on by order of Mortgage companies got bids over guide however did not sell due to Reserve Not Met (RNM). This can only be the case as the lenders have over valued in the past and now face negative equity. Failures.
  • Properties in North England and Wales were the hardest sale, many RNM and a few with highest bids well under guide prices.

PropVestment Conclusions: Auctions are now for selling

Property Auctions have changed now, its a much more public affair and it seems that its no longer a place where you can pick up a bargain. The sellers use it to sell properties that otherwise will not fetch a similar price through traditional means such as local agents. This tell us something about the quality of the properties and legalities of them. There were many amendments to the information provided with particular importance on certain higher rentals, those properties were on the day changed to vacant possession. Therefore the guide rental was incorrect, how is one to know what the real rentability of a property is without doing thorough research.
Due to these pit fall, an auction is no longer a place for inexperienced or first time buyers to find a property to buy. Auction are now for selling.
Rather it is a place where landlords can easily offload not so good properties and rely on the ignorance or lack of research of bidders.

PropVestment Auction Advice
Buyers – Do your thorough research and get someone to look at the legal documents prior to bidding.
Sellers – Use auctions to sell unwanted properties, especially in London, everything sells

Have a read of our observations last year at Savills here

SAVE up to £1,500 per Property in Tax relief by Being GREEN

Save money Saving the environment

Landlord’s Energy Saving Allowance (LESA) is a tax allowance of up to £1,500 per property that private landlords can claim when they install energy efficiency measures in their rented properties.
So for a portfolio of 10 properties that’s £15,000 tax savings. Being Green and energy efficient is important, this added financial incentive is easy to take advantage of, but it won’t be around for ever. Further at present in the economic climate it easy cheaper and easier to get improvements done, and do not forget winter is coming.

In 2004 the Government introduced a tax allowance called the Landlord’s Energy Saving Allowance (LESA), allowing private landlords to claim back money when they improve the energy efficiency of their rented properties. This is a very simple process with expenditure offset against tax through your annual Tax Return form, up to a maximum of £1,500 per property. Read more

HMO: Huge Money Opportunity?

Although Multiple Occupancy can achieve huge rewards in the form of rents, in particular student lets, Landlords must take the required legal procedures to ensure it is all above board. In our experience it is easy to gain over 50% premium on rental income under HMO. There are now professional agents that can take care of the managements and legalities but here are some basics you must know. Licenses are only £335, so get them and don’t risk fines or prosecution when the outlay is so small.

The returns can significant, raising the ROI above any other residential investment, letting are very easy through university listing or sites such as www.spareroom.com.  Please get the relevant advice and don’t take short cuts in the pursuit of profits.

After reading this nitty gritty we offer a fantastic investment opportunity at the bottom of the article.

Here is the Basics

What is an HMO?

HMO stands for House in Multiple Occupation and generally refers to one of the following:

  • A house split into bedsits
  • A house or flat share where each tenant has their own tenancy agreement
  • Students living in shared accommodation Read more

What the new shorthold tenancy classifications for UK private property landlords means

  • Deposit guarantee scheme for all properties earning upto £100k rental per annum
  • Failure to do so in 14days means no Section 21 (eviction order) can be served
  • Fines up to three times the original deposit
  • Student accommodation and multiple occupancy also affected
  • Advice: Use a reputable and experience lettings agent, email info@propvestment.com for our quote and special offers.
  • New legislation mainly affects high rental properties in particularly in London
  • Extra Red Tape that makes it difficult for honest, reputable Landlords

Read more

Demand > Supply = Residential property rents in the UK expected to keep rising

Residential property rents in the UK are increasing as tenant demand and a shortage of properties dominate a buoyant lettings market,

  • 26% more chartered surveyors reported a rise in demand for property rather than a fall
  • Strongest demand increase in London and the East of England.
  • Large deposits and difficulty securing mortgages leading to higher numbers seeking to rent rather than buy.
  • Low Supply, only 4.1% of Landlords intend to sell at the end of current AST. Supply fallen for fourth consecutive quarter.
  • Rents for houses are expected to marginally outperform flats.
  • However as property prices are still low, many owners may let for some time before selling, thus modestly increasing supply.
  • One in five landlords are experiencing rent arrears and many are concerned about the increase in Capital Gains Tax. Added to the forthcoming cuts to Local Housing Allowance and the possibility of increased interest rates, it is clear any increase in rents will be quickly offset by these additional factors that have to be taken into account.

Article is a summary of information from www.propertywire.com

Demand > Supply = Residential property rents in the UK expected to keep rising

Residential property rents in the UK are increasing as tenant demand and a shortage of properties dominate a buoyant lettings market,

  • 26% more chartered surveyors reported a rise in demand for property rather than a fall
  • Strongest demand increase in London and the East of England.
  • Large deposits and difficulty securing mortgages leading to higher numbers seeking to rent rather than buy.
  • Low Supply, only 4.1% of Landlords intend to sell at the end of current AST. Supply fallen for fourth consecutive quarter.
  • Rents for houses are expected to marginally outperform flats.
  • However as property prices are still low, many owners may let for some time before selling, thus modestly increasing supply.
  • One in five landlords are experiencing rent arrears and many are concerned about the increase in Capital Gains Tax. Added to the forthcoming cuts to Local Housing Allowance and the possibility of increased interest rates, it is clear any increase in rents will be quickly offset by these additional factors that have to be taken into account.

Article is a summary of information from www.propertywire.com