THE AUCTION MARKET IN GENERAL
From reports of the property auction sales for the first 6 months of the year, there appears to be no clear pattern – conversion rates vary from sub 50% to over 70% across the country. Much is to do with managing Clients expectations – what is apparent, however, is that the market in all sectors is hardening – a factor that needs to be reflected in the guide prices and reserves. The closure of major brands in the High Street due to unsustainable rents and unjustifiable hikes in business rates is affecting the commercial sector while the continued onslaught by Government and Local Authorities on private Landlords is worrying small investors who are the lifeblood of the private letting sector.
NOT ALL AUCTIONEERS ARE THE SAME
Our last auction produced, as predicted, a shade over £20million (£20.2 actually) making the total so far raised for Clients this year north of £100million at a conversion rate of over 70% – well above the national average on both counts.
As the market gets tougher the difference between auctioneers becomes all too obvious. When analysing statistics it is important to compare lots CATALOGUED to those sold and not lots OFFERED to those sold. The practice of withdrawing lots prior to the sale because of a perceived “lack of interest” by some auctioneers in order to enhance the performance rates is still rife – sellers should be aware of the integrity and subterfuge when choosing who is to be privileged with their instructions.
BREXIT IS NOT THE PROBLEM
As mentioned above, the market is definitely hardening although there is plenty of cash and finance available for those wishing to take advantage of the more difficult trading position. In my view this is nothing to do with Brexit, indeed, the weaker pound against the dollar and euro makes the UK market even more attractive to the foreign investor. The problem stems directly from the measures put in place by George Osborne and his misguided attack on property investors and overseas buyers. The unprecedented hike in Stamp Duty, withdrawal of mortgage interest relief and demonising private landlords has put pressure on the margins. Add to this the continual interference by Quangos such as the ASA and money laundering requirements and a constant change in the post of Housing Minister – all imposed without proper consultation – and it is hardly surprising that the edges are beginning to fray.
WHAT IS THE ALTERNATIVE?
But the market is being sustained as those with disposable cash and the need to make a return on their capital continue to invest. The increase in interest rates by just 0.25% will make little or no material difference to the housing market – builders will still build and buyers will still buy. The alternative is the stock market – and what a fickle environment that is. Even blue chip companies are under threat – especially those in the retail and manufacturing sector. Meanwhile, established companies grown by entrepreneurs over years with knowledge of the business and investment of their own funds are being compromised by the notion that the Board needs to be “strengthened” by City names – generally comprising people who have piggy backed on others success and never actual having taken a risk themselves – and certainly not with their own money!
THE MARKET OR THE MANAGEMENT?
It saddens me to see the share price of some of the most iconic names in the profession in free fall – those analysts that merely number crunch may blame the market – in my opinion it is not the market but the management that is at fault. The Board members sit back and encourage the founders to move over and allow a new person with no feel of the process put their “blue sky thinking” into practice. With no experience whatsoever in the field, they are given the opportunity to single handedly destroy a business that has been lovingly created over years by the people who actually used their own money and training to provide a service or product that the public understand and support. This phenomena is nothing new, I was a part of the Prudential Property Services debacle 30 years ago when the National Director was given unfettered authority by the Board to pursue his nonsense ideas having surrounded himself with the usual yes men- despite the hackneyed phrase – lessons never seem to be learned!
For those seasoned professionals in the property business, a tougher market ( I refrain from using crisis or recession) is hardly new – the best advice is don’t panic and keep the true experts in the business in place – the current situation is likely to be short term and when the roots start growing it is vital to have the expertise on board to handle the increase in instructions when they come.
