Investing at auction

Graph 4 also demonstrates this increased popularity of auctions.

Since Q1 04, the volume of residential auction sales expressed as a percentage of all sales recorded by the Land Registry increased from 1.2% to 4.7% in Q4 08. This trend has begun to reverse in '09 with the rate of private treaty sales improving and the proportion of sales at auction dropping back to 4.1%.

Graph 5 is based upon answers to the question 'are you purchasing for private occupation or investment' which was asked of all successful buyers at Allsop's residential auction sales since the start of the year.

Of those purchasers who provided an answer, the results show that the market so far this year has been dominated by the private investor. In June an overwhelming majority of purchasers (93%) bought for investment - up from 78% in February. In July the rate fell back slightly to 86%. The dominance of the private investor indicates that those with cash to invest are currently attracted to residential property at a time when prices are low compared to the peak in 2007. This is at a time when other investment vehicles, particularly returns currently receivable on cash deposits, are less attractive. The current market appears to view net returns from residential property as relatively rewarding and the prospect of capital growth highly likely in the medium term.

The results of our research also reflect the limitations of credit availability to many potential owner-occupiers when acquiring property. The reluctance of banks and building societies to lend higher proportions of loan to value continues although the situation is slowly improving.

Graph 4

Graph 5