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A ramshackle brick-built garage next to a south London light industrial estate has become the most expensive ever to sell in Britain after reaching an auction price of £550,000 in a “frenzied” bidding war.

The 568sq ft former coach house, used for years to park the mayor of Southwark’s car, went under the hammer for almost triple the guide price and £150,000 more than the average house in “up-and-coming” Camberwell.

It is also £25,000 more than was raised by the sale of a double garage in the shadow of Harrod’s in Knightsbridge, central London, last year – a record at the time.

The double-height bare-brick building with a 100sq ft cobbled drive next to Vanguard Court - an estate of 40 small workshops off Peckham Road - would require planning permission for change of use if it is to be turned into a residential property.

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More than 200 artists and small business owners who work in the adjoining studios launched a campaign to prevent Southwark Council from going through with the sale. They feared any future occupier could object to the noise and obtain a noise abatement order forcing them out.

Some neighbours believe the anonymous buyer may be a wealthy local artist who has stepped in to save the studios as an act of philanthropy.

Pop singer Florence Welch, actor Tim Roth, TV star Laurence Llewelyn-Bowen and film director Mike Leigh all studied at the nearby Camberwell College of Arts. Angel Of The North sculptor Anthony Gormley lives in neighbouring Peckham and has exhibited at the college’s gallery.

Auctioneers Andrew Scott Robertson, which handled the sale, described the garage as having development potential subject to planning consent.

Photographs in the sales brochure show the only fixtures and fittings behind the steel shutter are a pile of wooden pallets and two strip lights hanging from bare-wood beams.

Neighbour Craig Bamford, 42, an architect and artist, said: “For just a bit of space it’s a lot of money, but it would make a nice little house. It’s getting more expensive around here. They are saying we’re going to be the next Shoreditch.

“It’s worrying because it raises prices, then only the wealthy can live here and that kind of kills the interesting part of a place. We’re hoping it becomes somebody’s studio.”

Craig Gorman, 48, a carpenter, said: “It’s just a garage, I’m shocked someone would pay so much, even the starting price is too much, but then it’s becoming trendy around here.”

Another artist said: “Apparently it was one of the biggest sale turnouts with more than 100 people all trying their hardest to snap it up.”

Miles Shipside, 55, a housing market analyst for Rightmove, said: “I have never seen a garage go for this much. Half a million pounds to park your car in? That would be extreme.

“What’s ridiculous is the shortage of housing supply, which means people are potentially paying this sort of money to create a home because there is such a shortage of more traditional residential properties. People are having to be creative.

Richard Livingstone, Southwark Council’s finance cabinet member, said: “Like most councils, Southwark has experienced big cuts. We are therefore delighted to have sold this garage for such a good price.”