The Regions
Graph 8 shows AST yields at auction in Q2 ’07 and Q2 ’08.

Graph 9 shows the percentage shifts between Q2 ’07 and Q2 ’08 in AST yields, average lot sizes established at auction and average Land Registry transactions.

According to the most recent available Land Registry figures the average price of properties traded has increased in London, whereas all other regions have experienced falls.

Lower value transactions, involving, for example, first time buyers, lower income households and lower value properties, will be far more susceptible to limited availability of mortgage finance and tighter lending criteria imposed by lenders. Higher value properties will attract buyers with more equity and less reliance upon higher loan to value mortgage offers.

At auction, average lot sizes have dropped across all regions; the biggest falls being recorded in the South West (-24.8%) and Yorkshire and Humberside (-23.6%). London lot sizes have dropped by -8.7%. Voluntary sellers of higher value lots, not surprisingly very active in the year to Q2 ’07, have largely withdrawn from auction, deterred by the crystallisation of potential losses. Buyers of higher value lots, with equity and access to finance, are limited. Significant discount is expected on reserve and there is a general reluctance to commit to deals in the face of further potential depreciation. On the other hand, the volume of lower value stock offered is swelling as repossessions increase. Investors will be encouraged by the buying opportunities that these shifts present. Yields in all regions, with the exception of the South West, have risen. Highest returns from ASTs at auction are currently to be found in Wales (8.7%) and the North East (9.2%). According to ARIM (Allsop Residential Investment Management), which manages over 10,000 units across the UK for private landlords, demand for rented property is strong as the alternative of owner occupation remains difficult or unattractive. Newcomers to renting, such as former owners (increasingly families), are supporting this trend. Rental levels are improving with growth more pronounced for houses than flats. In the year to December 2007, the ARIM portfolio saw rental growth of +7.25% on reviews. The year to June 2008 saw +7.75% growth with the highest rent increases seen in East Anglia and Greater London.

Graph 8

Graph 9