"Six months ago we would attend auctions where few properties would reach their reserve price. Properties now regularly go for £20,000 or £30,000 above list price."
This tallies with data from Essential Information Group, the authoritative property auction analyst. EIG says that last month 71 per cent of properties listed for auction sold at reserve price or above compared with only 54 per cent in June last year. Demand may be growing, but prospective yields remain attractive.
A new internet service aimed at investors, propertyearth.net, amasses data from lenders, developers and agents to draw together only those properties that are not in a chain. These are primarily repossessions, but also include holiday homes, new homes that won't sell and properties being sold after the death of the owner. The site ranks properties by prospective yield.
The site shows scores of properties yielding more than ten per cent while the average yield of the 1,000 properties listed is 5.7 per cent. EIG managing director David Sandeman says his data shows that yields on "oven-ready" property for sale at auction -- where tenants are in place -- are between 8.5 per cent and nine per cent. "These high yields show there is daylight between income and likely outgoings," he says. "But landlords need that -- owning property is expensive."
As for Lisa and Nick, they have yet to buy. Their aim is to acquire two properties in the next year. "We are cautious," Lisa says. "We want to be certain. Ultimately, we're putting our capital at risk."
OPPORTUNITY KNOCKS, IF YOU HAVE THE CASH
The mortgage drought means that investors with cash are king. Lenders will not advance more than 75 per cent of the value of a property and the best rates are for loans of 60 per cent of value or less. All carry large fees, typically two per cent of the loan but as much as 3.25 per cent. Best rates include National Counties' five-year fix at 5.89 per cent with a £2,495 fee, maximum 60 per cent of value.
--Property information: Trawling for potential bargains is surprisingly difficult. Propertyearth.net is the only website to specialise in listing chain-free properties -- but its lists are not comprehensive.
Other web-based services offer investors details of repossessed properties for sale or at auction but may be unreliable, incomplete or both -- and they come at a cost.
Auction analyst Essential Information Group (eigroup.co.uk) offers the opportunity to search upcoming auction lists freely, but not to view entire catalogues.
Most auctions list properties from all over the country, but the biggest auctions tend to be held in the South. New auctioneer REDC (auctiontoday.co.uk) specialises in repossessions, but so far its catalogues have been unappealing.
Auctioneers' details are listed at residentiallandlord.co.uk. Before putting repossessed homes to auction, lenders often use big estate agents, such as Connells, Countrywide, Spicerhaart or LSL, to market them locally.
--Tax: From April last year, capital gains payable by higher-rate taxpayers on profits from investment properties fell from 24 to 18 per cent. There is an array of other landlord tax perks, most valuable of which is the offsetting of expenses against rental income for tax purposes. Mortgage interest, property repairs (not improvements), service charges, ground rents, council tax, letting fees (for lets of a year or less) and your own costs of maintaining an office, travelling and employing an accountant are all allowable.
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