The Intermediary – January 2024

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S P E C I A L I S T F I NA NC E Opinion

Investors up North look for homes under the hammer

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hile overall activity in the property market was down in 2023, this does not tell the whole story. For instance, property auctions saw substantial interest from investors and residential buyers alike, particularly in the North of England. Recent figures from Essential Information Group found that October had seen an 8.7% jump in the number of lots offered, and a 7.8% rise in the number of properties sold. The level of interest is pushing up the amount sold, too, which has risen by 14.2% to £380.8m. There’s a clear trend here, of investors recognising the opportunities that auctions offer in picking up assets which are perhaps in need of a li le love and a ention, but which have the potential to deliver a long-term return on investment.

Auction hotspots It’s worth reflecting on the fact that the properties appearing at auction are not spread evenly across the country. Instead, there are certain hotspots that have emerged – regions where investors have more lots from which to choose, and more opportunities to add to their portfolios. This was highlighted by a study earlier this year from Moverly, which pinpointed the North West and Yorkshire and the Humber as being particular hubs of auction activity, given that these two regions accounted for more properties going under the hammer than anywhere else. There are good reasons why the North is standing out as such a strong option for property auctions, not least the potential to secure stronger yields.

Investors are increasingly turning their a ention northwards precisely because of the yields on offer – the potential to enjoy a more significant return on the money they put in compared with areas in the South, which are held back by the higher initial costs. The ability to secure a property at a heavy discount through an auction – perhaps because it’s a distressed sale and a quick result is needed by the vendor – only further improves the financials on the deal.

Diversification is key Another feature of auction activity in this region is the interest in diversification. It’s not just about investors expanding the geographic reach of their property portfolio, but adding different types of properties into the mix. For example, we have seen a host of investors taking a closer look at mixed use assets. These properties are increasingly present at auction, and offer a useful route for landlords to add an element of the commercial property market to their portfolio. The fact that such properties qualify for our residential auction product means that Tuscan has been able to support greater numbers of auction purchasers, as this sidesteps some of the funding issues that investors have traditionally faced with mixed use assets.

Being prepared Given the appetite for auction purchases, it pays to be prepared. Rather than leaving it until the day itself, and courting the potential stress of auction finance falling through, it’s instead worthwhile ge ing the necessary funding lined up in advance. That way, the client can go

CARL GRAHAM is regional director for the North at Tuscan Capital

to the auction with a pre-approved offer, and clarity over exactly where they stand before the lots even go up for auction. Trust is a crucial element here. All brokers in this industry will have had experiences where lenders have not been able to live up to their word, leaving clients in a difficult spot. This risk is only heightened when we are talking about auction purchases, where there is a hard and fast completion date, a deadline that is always going to be testing for some. Working with lenders that can be relied upon to deliver what they promise and provide the required funds promptly is therefore absolutely crucial.

Need for speed What is clear among investor buyers in the North is the need for lenders who can move quickly. Speed is always a priority for property investors, but this is only heightened when it comes to auction purchases, given the restrictive deadlines in place. Lenders have to respond to that, showing that they have the processes which can ensure funds are delivered swi ly. At Tuscan, for example, we have seen a host of investors make use of our Fast Track Process, which utilises automated valuation models (AVMs) and desktop valuations, since it means they can move swi ly with confidence. If lenders are to service this market, recognising the importance of having a dedicated process for delivering funds quickly is absolutely vital. ● January 2024 | The Intermediary

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