By any measure 2015 has been a very good year for our clients and with the positive trends we saw prior to the summer being maintained at both our October and December auctions, we see no reason why the current strong market conditions will not continue well into the New Year…
Having achieved our best annual success rate, in over a decade, and with 81% of our buyers declaring their intention to buy again in the next 12 months, the demand for commercial property looks set to grow. An increasing pool of investors have discovered the appeal of owning a tangible asset that can produce a decent return with a risk profile to suit their needs. Indeed many are likely to be ‘buy-to-let’ investors frustrated by the taxation changes announced in the Summer Budget and the Autumn Statement. Other investors will no doubt be using pension money following relaxation in the personal pension regime. The influence of a volatile stock market on buyers also cannot be underestimated.
The supply of stock to the market is likely to increase during 2016 as some of the Private Equity Groups who purchased loan books will take the opportunity of selling into a strong market. Private individuals will also take a similar view, whilst we are also likely to see further consensual sales from borrowers who are either unable or unwilling to refinance. Loan expiries and the evident strength of the market will encourage others to re-evaluate their portfolios and consider taking profits. Receivership sales are also likely to continue to form a small but significant part of the market for the foreseeable future. Our unique view from the rostrum, where we can see the number of bidders for each lot, makes us confident that the market will comfortably absorb the likely increase in supply.
We were delighted to have achieved some truly excellent prices for our clients throughout the year. There were familiar themes amongst the more popular properties, with the vast majority being either well let, well located or having potential to add value. These properties are now in short supply and are accordingly attracting premium bids in the auction forum. We saw yields hardening at our December auction in particular for long income.
The private investor’s ongoing confidence in the UK’s High Street has been clearly demonstrated through the 10% increase in the proportion of retail sales we have seen relative to 2014. Clearly investor confidence in this sector remains strong. The number of Industrial sales at our auctions has remained fairly static and we see no reason why this would change. The effects of PDR on the office sector is clear: as the only auction house to have divisions dedicated to both commercial and residential sectors, we can deliver first rate access to the appropriate buyers, particularly for specialist buildings such as these.
London and the South East will remain the regions of choice for many investors, but increasing competition for a limited supply of stock in these areas will continue to drive the attention of some of these investors towards the regions in their search for better returns.
Following the Federal Reserve’s decision to raise interest rates in December, we are likely to see clearer guidance and possibly pressure on the timing of the UK’s first rise in interest rates.
As we commented in our Summer Review, we believe any rise will be modest and that the market has to a large extent already priced an increase such is the length of time it has been on the cards. Moreover, any rise in interest rates will be a reflection of a strengthening wider economy and it will be interesting to see whether this leads to an increase in the number of buyers using finance.
We expect the market will continue to look to the internet as a medium for the marketing and transacting of property. We have found many of our new buyers through the use of multi-channel marketing and we have provided our buyers with an online bidding service for almost 7 years. This service, in conjunction with telephone bidding, has served to enhance the accessibility of our auction room and enables us to find buyers from all over the world. Moreover, we are continually investing in new technology and monitoring the opportunities presented by IT.
The wide range of properties and the high volume of our sales consistently attracts new buyers. This unrivalled market access combined with the principal auction benefits of speed and certainty, make our auctions the obvious route to market for any potential vendors looking to take full advantage of the current market conditions and the strong prices we are achieving.
We would like to thank all our clients and our buyers for their support in 2015 and look forward to working with you again in 2016. We wish you all a very Happy New Year.