Savvy home buyers and investors have long headed to auction as a way to pick up keenly-priced properties.
But as with the mainstream property market, new trends are always emerging as buyers sniff out opportunities for a real bargain.
Andrew Binstock, co-founder and auctioneer at Auction House London, tells us what kind of properties are popular in the auction room right now – and why buyers are so keen to snap them up.
1. Flats with a short lease
Binstock says some auction buyers are making a bet on on the Government’s leasehold reforms, which would make it much cheaper and easier to extend a lease, coming to fruition.
As it stands, extending a lease will set someone back an average of about £10,000 including legal costs.
But a bigger problem comes if the lease has less than 80 years left when it is renewed. In these cases, the leaseholder may have to pay some of the ‘marriage value’ to the freeholder.
Smart: The property is located in this block in Chelsea, where flats can fetch up to £1.25m
The marriage value is the uplift in the property’s value as a result of the lease being extended, and leaseholders usually pay 50 per cent of this to the freeholder.
There’s effectively no upper limit on this and it can be extremely costly in some cases – which is why flats with leases below 80 years can fall in value rapidly.
Marriage value is set to be abolished under the Leasehold and Freehold Reform Act 2024.
The law is a long way from being implemented, but if and when it is, those who’ve bought cheap leasehold flats today could potentially sell them for a tidy profit.
‘Short leasehold flats are attracting strong demand – we have offered over 150 so far this year,’ says Binstock.
‘They have on average sold for 25 per cent above guide price, as buyers grow more confident around upcoming leasehold reform.’
A one-bed flat on offer at Auction House London’s next sale, on 2 and 3 July, has a remaining lease of just eight years. Located on Beaufort Street in London’s Chelsea, its guide price is £120,000.
Pied a terre: It could make a good base for someone working in the city during the week
Compact: The property’s kitchen makes good use of the available space
The property could make a good home for a single professional or a couple, or a pied a terre.
According to Foxtons, one-beds in the area fetch between £300,000 and £1.25million – creating a potentially huge windfall if the buyer pulls it off.
However, they are also taking on a significant risk.
Also on offer is a two-bed, third-floor leasehold flat on the harbourside in Poole, Dorset.
Located on Banks Road, it is a stone’s throw from the Sandbanks neighbourhood, which is home to some of the priciest properties in the country. It also offers beautiful views of the coast.
It has 46 years left on the lease and will go up for sale with a guide price of £225,000.
Flats in the same postcode sold for an average of £461,430 last year, according to Rightmove.
Good neighbours: The apartment is in this block, which is next to the exclusive Sandbanks
Great view: The two-bed apartment has an uninterrupted outlook over the beach
Cosy: It comprises a living room, pictured; kitchen; two bedrooms and a bathroom
2. Bargain homes in beauty spots
Another reason buyers are heading to auction right now is to find affordable properties in sought-after areas.
Someone who has been yearning for a home by the coast or in the Cotswolds may not be able to afford one that has been lovingly restored and decked out with all the mod cons.
However, if they are willing to get their hands dirty with an auction doer-upper, pricier locations can be within their reach.
In its April auction, Auction House London sold this period property in Cheddar, Somerset for £170,000, which was £20,000 more than its £150,000 guide price.
It is nestled in the Mendip Hills and close to Cheddar Gorge.
The building is currently used as a medical clinic and offices, but has permission to be converted into two two-bedroom flats.
New lease of life: The building is a medical clinic and offices, but has permission to be converted into two, two-bedroom flats
Hard work: The buyer will need to spend time and money converting it from its current use
According to Zoopla, flats in Cheddar sold for an average of £147,800 in the last year.
Permission could also be sought for a large, single-family home. Semi-detached homes sold for an average of £266,680 in the last year.
Similarly, Auction House London sold a two-bedroom, semi-detached house in the village of Cottenham, which sits on the edge of the Fens near Cambridge, for £152,000 at its April auction.
The average price of a semi-detached home in Cottenham last year was £381,136, according to Rightmove.
3. Shops with flats
Another popular purchase at auction is lots that combine a shop with flats in the building above.
This type of investment is attractive to landlords because it means that if one part becomes empty, they can still draw an income from the other.
‘The appetite for opportunity is clear in the mixed-use sector, where buyers are drawn to versatility and the scope to add value over time,’ says Binstock.
This building on the high street in Kington, Herefordshire is being offered for sale with a guide price of £120,000 at the July auction.
It comprises a shop on the ground and lower ground floors, and a split-level, four-bedroom flat above. It also has a rear garden.
Opportunity: The building comprises a shop as well as a large split-level flat above
Space: The ground floor shop area is in two sections and covers about 585 sq ft
Needs TLC: The buyer will need to carry out extensive refurbishment throughout
4. Plots of land to build on
Plots of land are another type of property which commonly comes up for auction – and Binstock says buyer appetite is strong because of the Labour’s push for more homes to be built.
He said that 80 per cent of land offered up at Auction House London went on to be sold.
‘The Labour government’s more proactive stance on planning is helping to restore confidence in sites with development potential,’ he added.
Land highlights in the upcoming July auction include a 3,897 sq ft parcel of land in Glastonbury, Somerset, on which permission has been granted to build five homes. It has a guide price of £65,000.
An 1,851 sq ft plot of land in St Albans, Hertfordshire, is also being sold with a guide price of £5,000 to £15,000.