Shrugging off fears that interest rates could rise, private investors are going into the auction room seeking properties which need only a routine makeover costing £10,000-20,000 to earn regular rental income.

“Around half the properties in our brochure are now subject to mortgage valuations so private bidders know how high they can go,” says Chris Coleman-Smith, head of Savills residential auctions.

The agency is currently selling 93 per cent of properties it puts under the hammer. Other agents confirm strong demand at auctions sales so far in 2006.

Some shrewd buyers make money shifting properties from one sale to another. Clive Emson, a leading South Coast auctioneer, sold a two-bedroomed flat in Hastings, East Sussex, for £89,500 – which sold a month previously at a London auction for £78,000.

Says Coleman-Smith: “Auctions are benefiting because prices on some new developments still look high.

“Small investors are reluctant to pay £300,000 for a glossy new one-bedroomed flat on the river when they can find similar living space nearby, albeit in older buildings, for barely half that.

“The real demand is for properties where buyers can add value at limited cost,” says Coleman-Smith.

“Typically they like to buy at around £160,000, and then spend £20,000 on new bathroom, kitchen and general redecoration to produce a home worth £200,000. That locks in a profit right at the start.

“Many parents use auctions to buy homes for children, particularly when they go to university. It’s a simple, easy way to get into parts of some cities where values are likely to rise in the medium term.”

Coleman-Smith says realistic pricing is the key to securing auction sales. “Investors buy if they see a return in excess of 6 per cent per year.”
Savills inquiries 020 7824 9091.