Real estate auctions – from strength to strength?
Despite the challenges posed by COVID, UK residential property auctions rose in popularity and momentum in 2020.
Allsop, one of the largest UK auctioneers, reported that results in the second half of 2020 surpassed that of the second half of 2019 – a remarkable fact given the wider economic uncertainty.
The residential market has proven very resilient. Although viewings have been limited, agile real estate professionals quickly pivoted to virtual tours and online auctions that empowered buyers and sellers to continue with their transactions as much as possible. Throughout this, demand for residential property as an asset class remained strong.
Research shows that the UK property market was on the rise over 2020, largely fuelled by the UK government’s temporary stamp duty holiday. An additional side-effect of the COVID pandemic, there has been a ‘mini-boom’ in the residential property market, especially in regions outside of London.
While the London market has remained relatively on track, properties situated on commuter belts and in the regions gained popularity as buyers looked for outside space and additional rooms to accommodate a working from home lifestyle. The so-called ‘London leavers’ bought 73,950 homes outside the capital in 2020, marking the biggest exodus from London in four years.
Allsop also reported an impact on shorthold tenancy investment yields. In 2019, Allsop’s Assured Shorthold Tenancy (AST) yields averaged 5.8% in London and 10.8% outside of London. In 2020 however, AST yields were 8.2% in London, compared to only 8% outside of London.
As working from home becomes a part of normal working practices, we expect the increase in residential uptake to continue into 2021. We also expect shift patterns from urban to rural living to continue, with a particular focus on the commuter belt. With changes to the pattern and schedule of office working, the need to be in a city, such as London, Manchester, or Bristol, for five days a week is no longer as strong. We expect homes with workspaces, offices, and annexes to be in high demand going forward.
However, we see reasons to be cautious. The end of the furlough scheme and government support, alongside the prospect of inflation, means that there are potential headwinds for the industry. There is also debate regarding the direction of house prices in 2021. Rightmove forecasts that house prices will rise by 4% in 2021, Halifax says house prices will fall by between 2% and 5% this year and the estate agents Savills and Hamptons both believe house prices will stay the same in 2021.
In the final quarter of 2021, Allsop predicts improved market activity and sees prices rising again on the back of the COVID vaccine roll-out and the conclusion of Brexit.
Despite a buoyant year for the UK’s property auction industry, and momentum across the broader real estate market, the direction of house prices in 2021 remains uncertain. What is clear is that the industry is resilient, agile, and ready to adapt to whatever is thrown its way.
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