The auctions sector tends to set the pace in the property market and the first half of 2017 has been no different.

Chris Coleman Smith

We are still feeling the effect of the consecutive stamp duty reforms, a cut to mortgage interest tax relief and much tighter lending criteria. While in 2015-16 it was a seller’s market, these changes coupled with static price growth have turned it into more of a buyer’s market.

The changes to stamp duty have had the greatest impact. Buy-to-let investors have been hit by numerous tax policies introduced in an attempt to level the playing field with first-time buyers.

Many auction buyers are investors, developers or those looking to add value and, although it hasn’t entirely put them off, we have seen a slight dip in transaction levels compared with results from before the reforms. In 2016, our combined auctions had an 81.5% success rate, whereas this year so far we are sitting at 79%.

These tax changes could prompt many existing or would-be landlords to assume that there are fewer buying opportunities, but this is not necessarily the case.

More discerning landlords should look towards areas where there is an active and established rental market and invest in low-cost properties, which can often be easier to find at auction. These low-value homes have a higher yield and will also give more borrowing ability.

That being said, Savills’ auctions business has remained resilient, providing some outstanding results since the beginning of the year, with some of the highest success rates in the market.

Our February auction, for example, had a success rate of 82%, with a total value of more than £72m sold, and our May auction achieved sales of more than £42m. To compare this with 2016, our highest-value auction was again in February, but achieved a slightly lower total value at £69m.

Accuracy and selection

Of particular note was the July sale of the Hippodrome in Golders Green, which attracted a lot of interest and eventually sold for more than its guide price on the day, securing a bid of £5.25m.

It was also the second-highest auction room sale of 2017 so far.

The Hippodrome, Golders Green

The Hippodrome in Golders Green sold for £5.25m

In February, we also agreed a sale at more than £7m post auction for an unbroken, grade II-listed building in Gloucester Place, Marylebone, which was arranged as 17 flats. It is reassuring to see that there is still movement at the top end of the market and an appetite for large lots.

Owner-occupiers seeking more realistic pricing have also driven demand. Many buyers now perceive auction pricing to be more in line with current market conditions.

Agents are having to work hard to manage the expectations of their sellers who had become over-optimistic about values, while buyers are looking to capitalise on the static price growth the market is currently facing. If they don’t believe a property’s price to be in line with current values then they won’t offer. The auction room offers an opportunity to bid on properties that offer relatively better value.

Just like estate agents, we have to manage expectations to bring them to sensible levels

This has also meant that we have had to be more selective when taking on properties.

Often, sellers come to us after they have tried to sell their property on the open market, thinking that it will be easier to get a higher price in the auction room.

However, just like estate agents, we also have to manage expectations to bring them to sensible levels and help sellers to achieve a strong price. It is important that those bringing their properties to auction are realistic about the current state of the property market and the prices that are being achieved.

Looking ahead at the rest of the year, we expect strong demand in the auction room from owner-occupiers to continue and a bounce-back in transaction levels from investors and developers as they begin to grow accustomed to the new normal. We also anticipate that land will continue to generate strong interest, either with or without planning permission.

Chris Coleman-Smith, Savills auctioneer