Private Investors Bolster Their Confidence in the Residential Property Sector

The sixth issue of RAPID (Residential Auction Property Investment Data) has been published by Allsop, the UK's leading auctioneer and the Essential Information Group (EIG) the leading provider of auction data.

The issues explored in RAPID 6 include:

Distressed Sales

• Number of distressed lots sold at auction since Q2 04
• The correction demonstrated in the Nationwide House Price Index
• Level of repossessions offered at auction

Investing at Auction

• Volume of auction sales as a percentage of all sales
• Percentage of investment vs. private occupation purchases at Allsop's 2009 sales

ASTs

• Comparative analysis of average AST yields in 4 regions of the UK

Ground Rents

• The performance of ground rent investments over the past 10 years

The key findings of the report include:

• Market sentiment has undoubtedly improved since late 2007 - shown by much stronger (in relative terms) market activity in Q1 and Q2 2009

Although bank lending is easing it still remains tight as private investors continue to invest their own cash. Property has been viewed by a growing number of investors as a viable alternative to cash given poor deposit rates - but this injection will not be limitless and needs to be supported by additional credit to maintain the strength of the current market floor supporting prices.

• Now is the right time to invest

Values are continuing to be sustained and showing small signs of increase. We believe that the housing market appears to be near to the bottom of the house price cycle but the shape of the recovery remains uncertain. Overall, if you have the cash or can raise the capital now would be a good time to invest.

• Location, location, location remains the watchword - with house price performance being micro-market focused today and likely to remain so in the immediate future.

Average yields are at 8.5% and rising, although higher yields (possibly at around 9%) are obtainable in the Midlands, Wales and the South West. London and the South East offer keener yields; below the National average.

• There remains a long term supply / demand imbalance which has not been helped by the very low number of starts in 2008 and 2009.

A poor supply of quality stock will continue to be an issue for some buyers. Many housebuilders have suffered losses and have suspended development. Private sellers reluctant to crystallise losses may have postponed plans to move home in anticipation of a healthier climate. On a positive note, however in the medium term this lag effect is likely to support prices in certain sectors.

• The effects of the high incidence of interest only mortgages that have become commonplace over the last 15 years are not yet fully understood.

Many borrowers have no viable means of repayment other than through sale of the property itself. Measures have been introduced by the Government to support those at risk of repossessions but we have yet to see an impact as repossessions recorded by the CML continues to rise. In Q1 09 lenders began to face increasing pressure to assist owner-occupier borrowers and avoid the ultimate sanction of repossession where possible. The appointment of a fixed charge receiver is now favoured by many lenders as an alternative to court order and repossession.

Gary Murphy, Partner and Auctioneer comments "Banks for the foreseeable future, will continue to use the opportunity presented by the current 0.5% base rate to improve their balance sheets. Under these circumstances private investors could be restrained by limited cash resources. Once these have been invested, there is a risk that further activity will be affected. Sustained recovering will be supported by willing lenders, but this alone will not be sufficient until the rise in unemployment is tempered, in order to fully restore demand and confidence."

He continues "There will continue to be opportunities in the market as forced sale situations come through the auction rooms. As the most efficient forum for delivering value for money to bidders and market value on the day for sellers, the sale room is expected to remain exceptionally active. And as ever, in an uncertain environment, it will remain one of the more reliable barometers of market sentiment."

David Sandeman, Managing Director of Essential Information Group added "Whilst volumes in certain sectors had declined earlier this year, recently there has been real evidence that confidence is returning to the marketplace. This is apparent through rapidly improving sales rates and numbers of lots being offered, and this is matched by increasing numbers of potential investors making enquiries about buying property at auction via our website."

The next issue of RAPID will be released in April 2010.

Gary Murphy, Partner Allsop
Tel: 020 7344 2619
Email: gary.murphy@allsop.co.uk

David Sandeman, Essential Information Group
Tel: 01737 226 150
Email: davids@eigroup.co.uk

Notes to editors:

RAPID analyses EIG data drawn from 536 residential auctioneers across the UK, and from information compiled from a data set of around 236,000 individual auction lots for general analysis and 15,000 for AST analysis. Drawing on Allsop's experience in the market place, the firm analyses the data and provides market commentary.

The four RAPID geographic areas are:
Area 1: Central & Inner London
Area 2: Outer London, South East and Eastern
Area 3: Midlands, Wales and South West
Area 4: Northern England and Scotland

Allsop
Allsop conducts seven major residential property auction sales each year. In 2008 the firm offered 1,660 lots with a success rate of 82%. www.allsop.co.uk

Essential Information Group
The Essential Information Group was formed in 1990 to provide the property industry with detailed property auction results. It covers the whole of the UK and is recognised as the industry standard for auction information. www.eigroup.co.uk

RAPID
To download a copy of September's edition please visit www.rapidinfo.uk.com, or alternatively call Allsop on 020 7437 6977 and speak to the marketing department.