Market Commentary

Ebb and Flow in the Market - No Spring Tide
By Richard Field, April 2011

So what's up? This is my 'take' as I see it in early April. Vendors have been testing the market at the beginning of 2011, but not in droves. Generally, there has been a shortage of property stock.

Some are holding back and would rather watch and wait and reinvest in/update their property. Others have to sell for a number of reasons. There is still some nervousness with the underlying worry of unemployment, inflation, interest rate hike, lack of mortgage funding and subdued wage increases.

As I write, we hear whispers of a potential further tax raid by the Government on top priced property though how this may work is not clear at this stage. There’s too much else to economically wrestle with at present and I would have thought stamp duty tax was enough! But ‘ mansion tax’ is seen as an easy target.

In the Country overall (London apart), property prices continue to drift downwards. It is knowing when to sell and buy back into the market which always requires some nerve and timing. The Land Registry has reported that the annual rate of decline (Feb. 2011) has increased to 1.7% from 0.8% in January. Nationwide shows average UK house prices rising by 0.5% in March (annual terms 0.1%).

There is, however, evidence now of accelerating activity on property coming to the market. An increasing number of prospective purchasers who are active and ready to deal are providing confidence to some sellers.

As a result of property shortages, interest and competitive situations, buyers are forcing prices up in prime property. International buyers are now beginning to look at the prime country house market out of the capital. Paying over the top, when competing on property already well-priced (before the stamp duty rise on 6th April) has seemed a fair gamble for some with the long term view in mind.

The London Market prices in prime residential areas remarkably continue to rise (annual growth 8%). There is strong activity with the steady influx of international buyers who see essentially a stable London market, have confidence in investing their money in this country and what we stand for. Savills quotes that prices in the London residential market continue to confound expectations.

These international buyers currently account for 70% of purchases in the £5m+ market. Gazumping has shown up in the London market. It always was evident! Interestingly, there is a strong market in South West London where prices have risen by as much as 2.2% in Q1 (2011). The rental market has also seen increasing demand which is forcing rents up and, on occasions, some fierce bidding.

As I said in January, pricing residential property realistically will be dependent upon local market conditions: result - sale or no sale. Another observation is that vendors need to think about and prepare well the presentation of their property coming to the market. Agents will provide a check list of advice. It is always useful to get a third party point of view. After all, estate agents are seeing hundreds of properties and know what may improve chances and make a sale.

Caroline Sherbrooke of our Dorchester office comments that despite a mixed picture elsewhere, there is activity in the South West of England which shows some growth of at least 1-1.2% in Q1.(Knight Frank Research). "Correct market pricing will attract interest from the cash rich who want a deal at a realistic price and like access to good schools and a more pleasing lifestyle" she says.

It is worth commenting that some 25% of property never reaches the 'open' market and is snapped up by those 'in the know'. Mainly by the whispering sector, consisting of search agents, who hear 'the beat' through the property jungle, work 'the people' and are active on the dinner party circuit. As a search agent, keeping in constant touch and having an ability to listen well to your client's likes and dislikes is important. Getting this right at the outset is going to save a lot of everyone's time.

Our 'Property Doctor Service' has been recently asked for an opinion on whether a vendor should go with a cash buyer paying a premium price to take it off the market or undertake the full marketing exposure to a wider audience and potentially a higher price. Having confidence in your agent, their ability on timing, knowing when to bring interested buyers to a 'property crescendo' of bidding and getting competent sound advice is key to any successful transaction. Every case is different and it is experience which makes it clearer. We are always able to give guidance. Agents want the best price and confident sound buyers. We want a sensible price for our client!

So we are seeing a three tiered market: prime top end - mainly unaffected and with impetus; the secondary/tertiary markets which continue to slide on values.

There is certainly an ebb and flow in this market. No Spring tide flood of property yet. Looking forward, Q4 will provide a lot of answers, particularly driven by the state of the UK economy.