There was a time when Spring started later and daffodils and crocuses only stuck their heads out in April when the snow had retreated. I recall walking along The Backs in Cambridge on a carpet of spring bulbs to Church on Easter Day. This year, the flowers risked frostbite by opening almost at the same time as my Christmas stocking! 

Spring and the Easter Bank holiday is traditionally the time when the Mr & Mrs Brit heads off to the DIY store and the local A&E is full of over confident masons, plumbers and carpenters. Retailers will be hoping that as well as starting early, their shops and superstores do a brisk trade through until June.

A tough property market is usually a good thing for the DIY stores as homeowners think of ways to improve their property rather than moving. With the cost of moving for many now reaching continental levels of over 6% and prices falling in many places, people often think that they can not only improve their home but also improve the value of their home at the same time.

But what can you do to add value?

Unless you are going to change the market for your property (by adding another bedroom or converting the loft) and appealing to a new pool of possible buyers then the best rule of thumb is to do things that improve the presentation of your home. A clean and tidy house is much more likely to sell than a grubby one. You want buyers to leave imagining themselves living there rather than talking about the ring round the bath. Spend money on a bit of paint rather than on a new bathroom suite.

Don’t spend money on ‘toys’ like a pool or tennis court. There will be some people who will appreciate a new kitchen but most people would rather put their own in than pay for your idea of good taste.

Minor damage like a broken window or a cupboard door should be fixed but don’t bother with a full make over. The Tv programs advice works well in a buoyant market but this is a time to encourage as many buyers as possible to bid not just the richest. You need competition to get the best price.

Cheap ‘green’ improvements are great and should improve the energy rating in your Home Information Pack but don’t be tempted by a wind turbine. Not everyone has a green conscience yet and even fewer are prepared to pay for one.

Tidy the garden but don’t tart it up. You don’t know if your buyer will have kids who want a football pitch or are avid gardeners. Let people see the potential, don’t make them pay for something they don’t want.

Remember that these days the buyer will want to see guarantees for any significant work carried out. Your offer to come back and sort out any problem with your DIY plumbing isn’t the sort of guarantee their lawyer will have in mind.

There’s a fine line between ‘home improvement’ and ‘property development’ – except in what a buyer will pay for. He expects to pay for professional work but not for something that looks like it was done by an amateur. If you have the inclination to pop down to the DIY store this Spring, concentrate on cleaning products, energy efficient light bulbs, some paint for the front door and perhaps a window box or a tub. Remember that first impressions count and leave the difficult stuff to a professional who is going to be paid to do what the purchaser wants. The chances are that like you, they will never get round to fixing the minor problems. They’ll be too busy enjoying their lovely new home and anyway they think that they can always do-it-themselves next Spring!

The latest figures released by Land Registry confirm that the property market took a significant dive last year with nearly 23% fewer houses sold in England and Wales according to the property website Primemove.com.

Spokesman Henry Pryor said “The latest update of data that we have been supplied with included 104,590 properties for December to be added to the 885,075 that had been recorded up until the end of November. This makes a total of 989,665 for the year compared to 1,283,459 in 2006.

“It was clear earlier in the year that the market was slowing significantly with the volume of sales down by between 25% and 30% as early as May” said Pryor who was one of the first to call the top of the market in January last year. “Homes had become unaffordable and when other factors such as the introduction of the Home Information Pack were added, it became clear that buyers were starting to melt away. The problems of Northern Rock and the removal of over 40% of mortgage products in the Autumn signalled the end of the bull market and we have started the year with asking prices down by an average of 5% as a result.

“We expect to see the number of homes put on the market to be down on last year which saw a record 2.9 million properties offered for sale. Sadly, repossessions will make up a bigger percentage with a worrying 27,100 keys being taken back last year. Although the Council of Mortgage Lenders are predicting this may double, if supply doesn’t pick up then these could account for 1 in 10 sales in 2008.

Its an old saying but every so often I’m reminded how incisive were Mark Twain and Disraeli before him and it’s usually when a tidal wave of numbers swamps my inbox as it has today. Data from The Halifax (saying that house prices haven’t changed in January), a survey from GE Capital (a big mortgage bank that says we have £2trillion of equity in our homes) and a barrel of numbers from the Office of National Statistics have come to confuse my brain.

I don’t intend to drown you too but there are a few numbers that could help us to make some sense of what is going on and that might also be useful in discussions in the pub or round the dinner table. If your discussions are like mine then a few statistics can be a real help (although an absence of them has never stopped us!).

There are about 25 million dwellings in the UK. 
18 million are owner-occupied (up from 12 million in 1981!)
11.8 million have a mortgage on them.
Total value of housing in the UK is £4trillion
Total amount owed in mortgages is £1.1trillion
Property values have increased 3.4 times in the past 10 years but mortgages by only 2.8 times.

Of course there’s more. So much more but let’s just hang onto these few and see if we can get a bit of perspective. What they tell us is that less than half of all residential properties actually have a mortgage on them and that over 25% of home owners (owner occupiers) are mortgage free. No wonder that some people say they are bored by property prices and by speculation on interest rates.

Less than half the population have mortgages. The majority of people either own their own home or rent and of those who do have a mortgage, about 2 million got them in the past three years. These are the first people at risk from a downturn in house prices. If the value of your home is increasing then you might have a warm glow but the actual value usually only really matters if you buying or selling. It is at this point that you crystallise your gain (or loss) but there is one other time that the value matters and that’s if you want to re-mortgage.

Back to the stats.

The one I left out was the number of homes bought and sold in a year. The figure is about 1.2miilion – less in a year like this I expect and more in the bull times. This is important because it is these trades, just 3% of all homes that sets the price or value of all homes. 

The market price of any commodity is derived from the prices at which that commodity is being bought and sold at any one time. It is the actions of just a few buyers and just a few sellers, be they repossessions or buy-to let landlords in the current market or speculators and developers that drive up prices in the boom times. This matters for everyone because it is these few trades which are recorded at the Land Registry and that valuers use to assess the worth of all property whether they have a mortgage on them or not.

That’s why house prices dominate the discussions in the clubs and pubs. It’s because they effect us all even if we don’t think we are in the market. 

Looking back, the most extraordinary aspect of the 2007 market was the speed with which sentiment altered; record price growth in the summer led almost straight into the negative winter market. Such a dramatic turnaround caused great uncertainty.
Conditions today are better suited to buyers rather than sellers, but this will still play out differently in all the micro-markets that make up the whole market. We expect data on house prices during the year to deviate quite markedly between the various sectors, geographical regions and types of property. In times such as this, categories of victims, survivors and predators tend to emerge. Those who have over exposed themselves will need to sell quickly and become the victims. The survivors will be tightening their belts and adopting the mindset of the ‘defensive consumer’. This, largely mass market sector, is where the greatest percentage of people will opt to stay where they are to weather a perceived storm; which is why transaction volumes are expected to be so low. Predators take the form of cash rich, chain free buyers who are choosing to buy rather than needing to buy. They are interested in doing business with any victims and will look to negotiate aggressively.
Whilst buyers in all sectors are being highly selective and wary about price, there is a noticeable difference between those making a discretionary or preference purchase, and those ‘needs based’ buyers who are moving because they have to. Quite understandably the former are more inclined to sit it out (unless they can find a victim), but the latter seem as keen as ever for the right opportunity. In January Garrington experienced a significant increase in client enquiries (twice the number from same period 2007). These have predominantly been from families needing to move for the typical reasons of having more children; school selection; vocational shifts; marriages and deaths.
January is a notoriously difficult month to talk about market trend – so here’s a summary of factors likely to affect the first 6 months of 2008.
Interest Rates: Further falls are widely predicted, nevertheless the pinch of higher rates will still be felt by 2 million homeowners whose fixed rate deals expire this year.
City Bonus Payments: Although some bonuses this year are being paid as restricted stock which cannot be traded for a period of time, contrary to popular perception total payments have increased by 30% to a record £14 billion. Much of this is certain to find its way into the housing market.
Supply: Increasing rapidly in London but still very low in the shires and regions. There is always a time lag and whatever happens in London is felt in the regions soon afterwards. The numbers of country homes being marketed for sale is therefore likely to increase in the Spring.
Demand: Plenty there for quality property but only at ‘a price’
Activity Levels: Total annual transactions predicted to be 15-20% lower than average. Greater turnover can be expected in the second half of year than in the first.
Prices: Vendors and agents have been setting plenty of ambitious asking prices in January. The market is incredibly price sensitive so these properties are not shifting.
Confidence: Still low but improving with each week
Behind all the headlines and statistical noise I believe the markets Garrington operates in have entered a period of consolidation and will still show marginal growth across the year. International buyers will continue to affect demand and therefore prices in the prime markets. In broad terms, the more special the property the more underpinned is its value. Houses in the super prime sector can be expected to continue showing reasonable growth as overseas buyers from countries untouched by the international credit crunch continue to enter the market.
The quality of clients Garrington is fortunate to represent is well recognised and our agent contacts are keener than ever to offer us early opportunities under current conditions. A fluctuating market place produces greater scope to haggle over prices, which means valuing is set to become even more of an art than a science. Accurate advice is fundamental to any successful purchase – but even more so at this stage in the cycle. We will be encouraging clients to concentrate on doing good deals on good properties and to walk away if either isn’t convincing.
It will inevitably be a much less buoyant or active market, however the fundamentals still look reasonably positive, which means the threat comes down to sentiment. Personally I think we can remain quietly confident about 2008 and should try to remember how much our homes have increased in value over the last few years. Be realistic. Let’s not allow the scaremongers to cause panic. Living on a small, popular and increasingly overcrowded island has many disadvantages, but it does mean demand exceeds supply in most areas and that in the long term property values are underpinned.
PHIL SPENCER
Chief Executive
6th February 2008
www.garrington.co.uk