Property Auction Insights
December 2024
In the final edition of 2024, we investigate the evolving landscape of the UK property auction market, and how it is being shaped by dynamic economic, legislative, and market forces. We explore how recent legislative changes, tax policies, and interest rate adjustments have impacted buyer and seller behaviours, as well as the types of properties coming to auction. This edition offers a comprehensive overview of key market trends reflecting the changing priorities of landlords and investors.
As we close out 2024, the report highlights the sustained demand in the auction sector, driven by resilient yields, strategic tax planning, and a steady supply of properties amid ongoing economic uncertainty. You’ll find insights into how buyers and investors have navigated rising interest rates and how legislative shifts like the Renters' Reform Bill are poised to influence the market in 2025. This data-driven analysis is designed to equip you with the knowledge to understand recent trends and anticipate future opportunities in the auction sector.
Focus on: Exploring the Impact of Economic Changes on Auctions
Over the past five years, the UK economic environment has been shaped by significant developments in legislation, financial policies, budgets, and interest rate changes, all of which have influenced the property auction market. Legislative changes, such as the Homes (Fitness for Human Habitation) Act 2018 and the Tenant Fees Act 2019, increased compliance requirements for landlords, making certain properties less attractive to investors. More recent reforms, like the Leasehold Reform (Ground Rent) Act 2022, reduced ownership costs for leasehold properties, enhancing their appeal in auctions. These shifts highlight how regulations directly impact the types of properties investors prioritise at auctions.
Financial policies, including stamp duty holidays and capital gains tax changes, have also played a pivotal role in the wider property market. The temporary stamp duty holiday (July 2020–September 2021) boosted overall market activity, driving demand at auctions as buyers rushed to take advantage of lower transaction costs. Conversely, capital gains tax adjustments have occasionally prompted investors to sell properties before increased taxes take effect, temporarily inflating auction supply. These financial measures demonstrate how taxation and incentives can influence both buyer and seller behaviour in the auction market.
Interest rate fluctuations, particularly sharp increases from 2022 to 2023, significantly impacted borrowing costs, reducing affordability and dampening demand, especially among leveraged buyers. Anticipated rate decreases are expected to reverse this trend, likely reviving auction activity by making financing more accessible. Meanwhile, regular budget announcements introduced or amended policies related to taxation and property, shaping market expectations and influencing behaviour. Together, these economic factors underline the interconnected nature of policies, market trends, and auction outcomes in the UK property sector.
Let's take a look into how these factors have impacted the property auction arena
Timeline of Events
The Budget
The data reveals distinct trends in auction sales volumes around the Spring and Autumn Budget announcements, with timing playing a critical role in shaping these patterns. Sales activity for the Spring Budget peaks significantly in at 4 weeks prior and remains elevated leading up to the announcement, before recovering in 6 weeks post after an initial post-announcement dip. This buoyancy is likely driven by the proximity of the Spring Budget to the financial year-end, as buyers and sellers rush to finalise transactions before tax deadlines or policy changes take effect. The heightened urgency during this period explains the pronounced pre-announcement activity and the subsequent rebound as participants adjust to the new fiscal landscape.
In contrast, the Autumn Budget, typically announced in late October, reflects a more subdued sales pattern post-announcement. Sales peak at one week prior before tapering off and stabilising. This trend aligns more with seasonal factors, as November traditionally being a quieter month for auctions ahead of a busy December.
Interest Rates
The data highlights the impact of interest rate changes on auction activity, particularly in the weeks following announcements. While pre-announcement patterns are coincidental due to changes being announced same day, post-announcement trends reveal clear differences in buyer behaviour. Rate increases show a steadier, more predictable response, with only a modest drop in sales in Week+1 and consistent activity thereafter. This stability likely reflects buyers adjusting quickly to higher borrowing costs, either through reliance on pre-arranged financing or recalibrating their budgets. The recovery by Week+6 demonstrates the market's capacity to adapt to elevated rates.
In contrast, rate decreases trigger an immediate spike in sales, followed by a sharp drop in Week+1 and a gradual recovery as reduced borrowing costs filter down into lending products. However, the smaller dataset for decreases may exaggerate these trends, making the observed patterns less representative of typical market behaviour. Overall, the data underscores how rate changes do have a nominal effect on property auctions, while buyers may show caution as to the impending change to their borrowing capabilities.
Economic Effect
Changes to Capital Gains Tax (CGT) significantly affect investor behaviour by altering the profitability of property sales. Ahead of CGT increases, investors often rush to sell properties to avoid higher tax liabilities, as seen in the spike in auction sales in Week-1 (963 sales). After implementation, sales typically drop sharply as investors adjust to the reduced profitability of transactions under the new tax regime. Over time, activity rebounds as the market stabilises and investors adopt new strategies, such as longer-term holdings or tax-efficient structures, to mitigate the impact of higher CGT rates. These patterns highlight how CGT changes create short-term market disruptions, followed by an eventual return to equilibrium.
The Stamp Duty Holiday, introduced during the COVID-19 pandemic to stimulate the housing market, had a more immediate impact on buyer timing. Before its introduction sales activity had slowed, but the market surged in the weeks following. Conversely, as the holiday neared its end, sales spiked as buyers rushed to complete transactions under the reduced rates, followed by a significant drop in demand after its expiration. This behaviour underscores the strong influence of temporary financial incentives, which can create sharp peaks and troughs in auction activity as buyers respond to changes in transactional costs.
Legislation Changes
The legislative changes outlined in the data impacted various segments of the property market, with some targeting the broader housing sector and others specifically affecting landlords and rental properties. The Extension of the Homes (Fitness for Human Habitation) Act 2018 and the Minimum Energy Efficiency Standards (MEES) primarily targeted landlords, aiming to ensure that rental properties meet basic habitability and energy efficiency standards. These changes, reflected in relatively stable auction activity after their implementation, prompted landlords to offload properties that required costly upgrades to comply with the new regulations. Similarly, the Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 introduced mandatory electrical checks for rental properties, further increasing compliance costs for landlords and contributing to similar auction trends.
Other legislation, such as the Tenant Fees Act 2019 and Right to rent checks, directly influenced rental market dynamics. The Tenant Fees Act 2019 restricted the fees landlords and agents could charge tenants, reducing rental profitability and potentially pushing landlords to sell off properties, as indicated by the spike in auction sales leading up to its implementation. The Right to Rent checks placed additional administrative responsibilities on landlords, which may have similarly contributed to increased auction activity in the weeks surrounding its enforcement. On the other hand, the Leasehold Reform (Ground Rent) Act 2022 benefited buyers by eliminating ground rents for new leasehold properties, which could explain the reduced auction volumes post-implementation as these properties became more attractive in other sales channels.
The broader-reaching Building Safety Act 2022 and Finance Act 2024 affected the entire property market. The Building Safety Act 2022, which introduced stricter safety standards in the wake of high-profile disasters, likely increased costs for developers and property owners, contributing to the surge in auction activity before implementation (Week-1). The Finance Act 2024, which often includes measures affecting taxation and property financing, showed a dramatic spike before its introduction, reflecting investor urgency to complete transactions before potential costlier measures took effect. These patterns illustrate how legislative changes drive varying levels of activity depending on their target audience, whether landlords, investors or the broader market.
Update On: Changes in the Tenanted Stock Market
The investment and tenanted stock market has seen considerable activity in recent years, with fluctuations driven by supply, market conditions, and evolving legislative pressures. Auction data highlights changes in investor behaviour, influenced by factors such as yields, average sale prices, and the composition of property types. The upcoming Renters' Reform Bill, anticipated in 2025, adds another layer of complexity, as landlords and investors prepare for potential shifts in the regulatory landscape. This section reviews three key aspects: lots offered and sold, the breakdown of lots sold by property type, and trends in sale prices and yields, providing a comprehensive picture of the market's current state and its direction.
Volume of Lots
Since 2022, there has been a consistent increase in lots offered and sold, with a peak in 2024 Q3, where 2,226 lots were offered, and 1,551 were sold. This upward trend reflects both growing supply and resilient demand, as investors take advantage of opportunities amidst changing economic conditions. The stable ratio of lots sold to lots offered suggests sustained buyer interest, even as external factors, such as inflation and rising interest rates, impact borrowing costs. The increase in stock may stem from landlords exiting the market due to rising regulatory and compliance costs, creating an influx of tenanted and investment properties available for auction.
Property Types
The dominance of residential properties in the market continues, where they consistently account for the majority of lots sold. In 2024 Q3, residential lots reached 1,075, indicating strong demand, driven by stable rental income and favourable yields. In contrast, commercial and mixed-use properties have shown more subdued activity, reflecting ongoing recovery challenges in these sectors due to post-pandemic adjustments and fluctuating demand. The disparity between residential and non-residential categories emphasises investor confidence in housing as a reliable asset class, particularly in times of economic uncertainty.
Average Sale Prices and Yields
There have been significant shifts in average sale prices and yields over time. Yields have risen steadily, peaking at 10.1% in 2023 Q4, driven by declining property prices and strong rental returns. Average prices dipped notably during 2023 but recovered slightly in 2024, suggesting growing investor appetite for higher-yielding opportunities. This trend underscores a focus on maximising returns in a challenging economic environment, where rising yields compensate for the potential risks associated with regulatory changes and financial pressures. The alignment of increasing yields with stable demand demonstrates the enduring appeal of the investment and tenanted stock market.
The upcoming Renters' Reform Bill, expected to come into force in 2025, introduces significant changes to the rental sector that could further alter investor behaviour. Key provisions, such as the abolition of "no-fault" evictions, the creation of a property portal, and the introduction of a private renters' ombudsman, aim to enhance tenant rights and create greater transparency in the rental market. While these reforms may improve tenant stability, they could also increase operational costs and reduce flexibility for landlords. In anticipation, many landlords may choose to exit the market, contributing to the increase in auction supply seen in recent quarters. These legislative changes will likely continue to shape the market as investors adapt to the evolving regulatory landscape.
Focus On: Adding Festive Cheer to Your Property Portfolio
For those who enjoy the idea of adding a touch of festive charm to their property portfolio, homes with Christmas-themed names offer a unique appeal. Over the years, properties like Holly Cottage and Star House have graced the auction rostrum bringing festive-named homes that offer unique warmth and character to the market. Road names can also add to the charm, with addresses such as Snow Hill, Noel Street, and Mistletoe Street providing a playful and seasonal twist. These properties and streets create a sense of nostalgia and individuality that resonates strongly with buyers.
The good news is that festive properties aren’t just for December - they are popular at auction throughout the year. Whether it’s the timeless charm of a property on Holly Road or the whimsy of an address like Rudolph Road, or even the famous Christmas Steps, these homes and locations offer more than just a name; they provide a unique connection to the joy and tradition of the holiday season, making them a cherished part of the market for buyers looking for something extra special. So, what will you be adding to your Christmas wish list for Santa this year?
Regional Data
Every quarter we will be including regional data from the past five years, including the number of lots sold and the average sale price, and now average yield too. This allows you to track what is happening across the country, to spot trends, and see how changes in the wider market may be affecting auctions.
The data in these charts consist of all auction sales on a quarterly basis, including individual single lot sales.
Data for all unconditional auction sales.
Data for all unconditional auction sales where there is an income.
London
South East Home Counties
South West
Yorkshire & The Humber
North West
North East
West Midlands
East Midlands
East Anglia
Scotland
Wales
North West Home Counties
Northern Ireland
Regional Data Analysis
It is evident that broader economic impacts reverberate across various regions, exemplified by the repercussions of Covid-induced lockdowns on the auction market in 2020. Additionally, the noteworthy surge in properties entering the auction sphere in 2023 further underscores the dynamic nature of the market. While analysing the significance of this data, it is imperative to consider the volume of lots being reviewed, especially in less bustling regions where more pronounced fluctuations may occur owing to the comparatively smaller datasets at play.
Closing Summary
We hope that this edition has underscored the resilience and adaptability of the UK property auction market amidst economic and legislative challenges. Rising yields and strategic adjustments to changing tax policies have played a significant role in sustaining buyer interest, even in the face of rising borrowing costs. Legislative changes, from the Tenant Fees Act 2019 to upcoming reforms like the Renters' Reform Bill, continue to shape the market, prompting shifts in property supply and influencing investor priorities.
Looking ahead, the market remains robust, with opportunities to capitalise on shifting trends. Whether it’s properties offering unique charm, investment stock responding to regulatory changes, or broader economic forces shaping buyer behaviour, the insights provided here aim to help you navigate the complexities of the property auction market with confidence. As we transition into the new year, the sector is set to evolve further, presenting both challenges and opportunities for stakeholders across the market.
I would like to take the opportunity to give a special thank you to Rachel Canham, Rowan Harry and the wider team at EIG for their invaluable support and expertise in working with me to compile our quarterly reports.
If there are any topics you would like us to focus on in future releases, or you have any feedback or thoughts you would like to share, please contact us on insights@eigroup.co.uk.
Thank you for reading!
David Leary
PS. Our next edition will be released in March 2025, so if you are not already on our newsletter mailing list, sign up today!
Disclaimer: The figures in this newsletter are based on sales data provided to us by the auctioneers.