Commentary Archive

« Back

Cold snap in the Market?
By Richard Field, January 2011

There have been a plethora of predictions on the market and turbulence created by the property commentator in recent times. What I do know is that everyone appears to be an expert and have a view on the property market.

It has been the subject of much debate and speculation in the City, the professional bodies, mortgage lenders, estate agents, property portals and the media. Then, of course, there are the economists who have an analytical approach to their reasoning. Who should one believe?

Yes, you are right! Many have been guilty of being wide of the mark on the highs and lows of the property market predictions and regularly update their forecasts. Can anyone get it right? This is an area the Government needs to get hold of and establish some common ground which the purchaser, vendor, lender and estate agent can understand and have some belief in. We need an official House Price Index with far greater clarity. The Market continues to be a topic of conjecture and further discussion at supper parties throughout the land!

London continues to 'buck the trend' and hold up on prices driven by a shortage of stock and a consistent demand which has been fuelled by international buyers. The early months of 2011 will provide some clearer answers. More property will be forthcoming but not an avalanche and, where there is demand, prices will hold up. Not to forget the City bonuses which will only partly seep into the system. Prime areas of London will continue to be popular and professionals who seek to be close to good schools and like minded families will still buy. The rental market values will continue to rise as there will be a growing healthy demand for rental property.

The way forward is to ensure that you are in a position to deal and move in the market quickly, have your finance arranged and ensure an element of flexibility on timing. There will be a higher degree of scrutiny on prices quoted which will mean a more discerning cerebral approach to making offers. Vendors need to listen to their agents on valuations. Over inflated ideas by owners coming to the market are sometimes influenced by tittle tattle dinner party talk on what high price was obtained next door. Over pricing may taint a property and as a result it will take time to shift. Better to create a market with realistic pricing and consequently kick-start a market with potential interest from buyers.

Mortgage lending continued to drop 26% in the 12-month period September 2009-2010. Future deals will be challenging and there will be a need to consider the best possibility to suit the individual in a volatile financial market place. Advances in 2011 are likely to be £135 billion (Source: Council of Mortgage Lenders). A hike in interest rates is a possibility during Q4 in 2011 and will create some hardship. Increases in VAT, rising unemployment and escalating living costs are all signals providing a jittery market.

Some predictions indicate reductions of 2-7% in property values during the year. I suggest that, once some confidence returns towards the latter part of 2011, prices will stabilise. If there is a shortage of stock, then prime well-presented residential property in popular hot spot areas will still command high prices brought about by competitive bidders who have ready available cash.

Caroline Sherbrooke comments that a rate of increase in values of property in the South and South West of England have been decreasing over the past 6 months. "It is our belief that we may see a further weakening in prices: however, the key to a positive result is correct pricing at the outset. Prospective purchasers need to have the ready finance available, acting without incumbrance and sourcing sound advice in a buyers' market. Both vendor and purchaser need to be flexible at the time of the transaction" she said.

Challenging times ahead but not all gloom and doom! If there is scope to observe and wait with a long-term view in mind, then it may be to your advantage. Clever investors will take their time, watch and then make their move. Over the market as a whole, I predict a flat lining on values until late 2011.

For those who need advice, why not take advantage of our new "Property Doctor" service, which provides sellers and buyers with impartial independent advice.