2018 was never going to be a year without challenges. As work started on the preparation of the first catalogue of the year, we were acutely aware that we were operating in a softening market. Private investors were coming to terms with the shock of a new penal tax structure that imposed a 3% stamp duty surcharge on investments as well as tapering income tax relief on rental income. The London market, which had previously seen significant spikes, due largely to overseas interest in higher value locations, was now cooling considerably. There was growing political instability and general economic uncertainty due to Brexit. And most feared that we were likely to see a rise in interest rates, if not immediately, then later in the year.
2017 had started well with an 83% sale raising £64.5m. A year on, we were encouraged to have improved on this significantly. February’s sale took nearly £80m from the market with an 80% conversion rate. The outlook seemed more promising than expected. There was a noticeable increase in the average lot size, with 18 lots each achieving over £1m and contributing to more than half of the sale’s total receipt with almost £42m. The sale set a new UK record for the highest sum achieved for a single building at a residential auction (£8m).
The market showed depth of demand and buyers demonstrated a readiness to do continued trade - but not at any price. As the year unfolded, it was clear that price sensitivity was heightening. Reserve price management was key to success - but not all vendors were comfortable with our advice. As a result, July’s catalogue was slimmer than a year earlier. As the economy continued to soften, many sellers showed a reluctance to sell if they did not have to at that time. Buyers were equally coy. We saw many sitting on their hands in the room, preferring instead to negotiate on unsold stock before the day had ended. Sale percentages over the second half of the year were sustained, but only as a result of enhanced post auction activity.
As expected, interest rates rose but only by 0.25% in August. There was no perceptible impact on the September sale which posted a £50m total and endorsed a back to business sentiment, the result boosted by the £7.5m sale of an unbroken terrace of 11 houses in East London.
The year ended on a very positive note despite disarray in Westminster and the prospect of a no deal Brexit. December’s sale recorded a total of £58.4m - up £27% on December 2017 - and brought the 2018 residential sales total to £408m with 79% of lots sold. The result was down on 2017’s £425m. Against the background of wider economic tremors, we are pleased with the outcome. We have outperformed the auction industry average success rate of 70%. Traffic to our online catalogue has been higher than ever before and there has been no abatement in interest in the stock that we have selected for our market. The overall conclusion from the year though is that realistic pricing is paramount.
Author: Gary Murphy