Are we nearly there yet?
Monday 16th February 2009
Are we nearly there yet? The housing minister who mentioned “green shoots of recovery” may have been universally lambasted recently but, according to reports we’re getting from agents, developers and lenders, she may have had a point. There are real signs that the bottom of the market is nigh and, more encouragingly, that the conditions are shaping up for a limited recovery in the near future.
Big talk, I know, but I feel it’s our responsibility on the front line of the industry to report these changes and drive the press debate, rather than just reacting to the latest Halifax and Nationwide results.
From what we’re hearing, the distressed market is retreating. Competition from investors and first-time buyers for the finite supply of properties at the bottom of the market is firming prices, with bidding often pushing final sale prices over asking prices. This is especially true of properties with seven-day notices on them.
Two recent cases spring to mind which illustrate a real change in buying habits. An agent recently told me about a seven-day notice property in Old Trafford, Manchester, which was independently valued at £57,000 and is currently accepting bids of £74,000 and rising. Another agent in St Ives told me about a property which had been on the market for seven months at £195,000, had an offer of £165k just before Christmas and now, after multiple viewings and bids in January, was sold last week for £192,000. What a turnaround!
These cases are becoming more and more frequent. Developers we’ve spoken to, like Bryant Homes Southern, have told us about a real turnaround in their sales volumes and prices being achieved. Their main issue has been lack of equity due to historic price falls which is suppressing people’s ability to trade up, but as prices firm, developers will inevitably become more bullish when pricing the part-exchange buy-in.
Lenders we’ve spoken to are also reporting more positive results. A sample of some 2,000 sales made between October and February 13 confirms a clear upward trend in percentage price achieved, from 91% in October to 94% now.
So why is this happening? What has changed? Well, the cuts in interest rates haven’t hurt and lenders are talking about releasing more affordable mortgage products, but the real driver of this trend is the competition for good-quality homes in good areas which is driving prices and is the clearest sign we’ve had so far that we’re seeing the bottom of the market. Sentiment is changing: borrowing is cheap and people are starting to realise that investment in property is more prudent than saving in banks in the current climate.
Essentially, the finite supply of saleable properties, usually from corporate vendors, is falling away and demand is steadily increasing. Properties from aspirational buyers, the economic engines, are still not coming to market as mortgages on the whole remain difficult to attain and the constant stream of negative reports put people off moving.
As I mentioned earlier, this is encouraging because it lays the foundations for more price firming in the coming months, so much so that the Government may have to be careful to avoid a mini-boom in prices as they release liquidity. I’m surprised we haven’t seen more parents and investors funding deposits for first-time buyer offspring and getting a better rate from an equity and yield rather than leaving their money in the banks earning very little.
The signs are that, as long as properties are priced accurately, there’s more chance now than at any other time that they will be matched by the selling price.
* Robin King is a director of movewithus
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