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The Rise of Patient Capital

Piotr Rusinek and Jay Howard, of auction specialists HAMMERED and the Auction Buyers Club, comment

There are a variety of different things we observe from different perspectives we place ourselves in: we act as agents for sellers looking to sell); we help a 20-odd group of auction buyers regularly review auction lots via our Auction Buyers Club, and finally, we buy and sell properties ourselves via our property co. This gives us a unique perspective to notice a market dynamic, which suggests a shift in the type of capital making the biggest impact in the auction world now. Historically, auctions have been the playground for those seeking quick returns. However, as the landscape evolves, it seems the time is ripe for more patient capital to make its mark.

Let’s delve into the concept of patient capital. Unlike its counterpart, which is always in a rush to multiply, patient capital is more strategic. It’s the type of investment that wealthy individuals deploy during economic downturns and crises. History is replete with examples of the affluent becoming even wealthier by making astute investments during such times. They understand that downturns present opportunities to acquire high-quality assets at prices that might never be seen again.

Now, why is this relevant to the UK property auction market?

Our recent analysis of the EIG market update reveals some intriguing patterns. While there’s been a significant uptick in the number of lots offered – with a 6.8% month-on-month rise in July 2023, a 16.2% increase in the May to July 2023 quarter, and a 19.9% surge from August 2022 to July 2023 – the percentage of lots sold has seen a decline. This discrepancy between supply and demand has led to a 26.8% drop in total revenue raised in July 2023 compared to the previous year.

This scenario might seem alarming to some, but for the discerning investor with patient capital, it’s a goldmine. With interest rates approaching 6%, capital values are undoubtedly affected. But this is where the astute investor diverges from the crowd. They see beyond the immediate implications of rising interest rates and focus on the long-term potential of assets.

Auctions, by their very nature, are designed for immediate transactions. Sellers aren’t there to test the waters; they’re there to close deals. And in a market where the number of offerings is increasing but sales are dwindling, it’s evident that opportunities are ripe for the taking. 

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