IN THIS MONTH’S article I have extracted two of the graphs from the recently published RAPID report. RAPID (Residential Auction Property Investment Data) is compiled in conjunction with Allsop, reporting on how the residential auction market is performing. The graphs and text below highlight the rise and fall in sales of new build flats at auction. Download the full report at www.eigroup.co.uk/market-data/rapid.

GRAPH 1
Flats falling in value

Graph 1 shows the number of new build flats offered and sold at auction in the UK on a quarterly basis since 2005, together with a line depicting the average fall in value. This is calculated by comparing the price paid at auction and the purchase price initially paid for the same property and recorded at the Land Registry.

Sales of new build flats at auction peaked in 2008, with 1,046 being offered under the hammer in H2 2008. Average price falls of over 46 per cent were recorded in this period, and this grew further in H1 2009 to just over 52 per cent. Since then average price falls have steadied themselves at just over 44 per cent, whilst the volume being offered has fallen considerably to just 263 properties in H2 2009.

The decline in values coincides with a major shift in the Buy To Let (BTL) market. Landlords who purchased new build stock for investment were faced with the challenges posed by massive over supply, limited tenant demand and escalating debt. Owner occupier demand from first time buyers was virtually eradicated by the mortgage drought. In any event, the new build city centre product was typically built specifically for the BTL market and was often small and unattractive to owners. As BTL loans failed, lenders repossessed and sold at substantial shortfalls.

GRAPH 2
Flats offered by region

The largest numbers offered at auction have been in the north of England, Scotland and Northern Ireland, peaking at 279 in Q4 2008 and falling to 63 in Q1 2010. Only 2 new build flats were sold in London in the first quarter of 2010.

THE RAPID REPORT ISSUE 7 SUMMARY OF CONTENT:

• Following a fall in distressed sales at auction, and a rise in private treaty transactions generally in 09, sales levels in both areas are stabilising.
• Average AST yields across UK have climbed since Q2 07 in all 4 geographic ar eas to within 7.1% and 9.2% (Q4 09)
• Average regulated tenancy yields across UK have risen from 2.9% in Q3 07 to 4.8% in Q4 09. Curve reflects fa lling BoE Base Rate.
• Value falls in new build sector now less severe as numbers offered at auction decline sharply after Q4 08.
• Stamp Duty (SDLT) thresholds proven to be significant barrier to bidding into higher tax bands.
• Post recession / pre election climate remains stable despite uncertainty ahead.