It was all going so well. Despite an unwelcome tweak to commercial property SDLT rates in March, we held three of the UK’s biggest commercial auctions and sold the largest lot under the hammer since 2007 during the first 5 months of 2016. And then…
Much has been written about the effects of the EU referendum result, but ultimately it will take time for it to be fully understood. The majority of buyers at our July auction were using cash and were prepared to take a pragmatic and long term view; with interest rates now predicted to stay lower for longer, negative returns on government bonds and heightened volatility in the stock market, it’s not hard to see why. For many it is the ability to own and control a tangible asset which can provide a steady income flow whilst acting as a hedge against inflation. The auction room provides investors with easy access to a wide range of opportunities to meet this demand.
In our 2015 Annual Market Review we suggested the supply of stock in 2016 could increase and that this would be comfortably absorbed by the market, and
this has indeed proved to be the case. It has been largely driven by the orderly break up of loan portfolios, some of which are in receivership, and we anticipate
these sales will continue as vendors, who appreciate the benefits of certainty and speed associated with selling by auction, continue to capitalise on the auction
market’s strength and liquidity.
Properties which are either well located, well let or offer potential to add value have all continued to attract keen bidding, resulting in some truly excellent prices
being achieved. Looking ahead we expect this to continue. For the more secondary and tertiary properties, however, we suspect buyers could become more selective and risk adverse.
Changes in SDLT, which has resulted in lower rates for commercial properties under £1 million, an increase on residential property by 3%, together with reductions in tax reliefs for buy-to-let has further enhanced the appeal of commercial property investment.
Our March and May auctions this year were notably larger and our July auction smaller compared to recent years. We suspect this was partly due to a desire to
get sales done prior to the referendum, followed by uncertainty setting in as it approached. Thankfully the negative press surrounding commercial property
which then followed had little effect on the excellent results we, and others, achieved in July.
Until the timeline and terms of the UK’s exit from the EU are known, uncertainty is likely to remain the overriding sentiment with the cost of debt being set to remain low for a longer period. Such environments always present opportunities, for buyers and sellers alike.
In summary, the concerns expressed over the impact of the referendum result on the economy in the short-to-medium term look to be receding. Interest rates remain low and supply of properties is tight and therefore we see no real change in the market conditions over the next half of the year.
As long established leaders in both the commercial and residential auction markets the Allsop Auction Teams along with our National Investment Teams selling by private treaty are uniquely placed to help both buyers and sellers take full advantage of the market.
We would like to thank all our clients for their continued support and very much look forward to working with you at our sales in October and December.