99% of what you read in the papers about the housing market, hear on the radio or see on tv is put out by people with something to sell. Estate agents, mortgage brokers, mortgage lenders and websites – all know about the market because they are selling houses, mortgages or financial services but they must be optimistic or they lose business. No one will instruct a depressed estate agent. You wouldn’t want to borrow money from a pessimistic bank so these commentators must have a glass that is half full. They celebrate ever rising prices because if they walked out of the Today studio having suggested that the market might be sliding their clients would dis-instruct them on the spot. In fact, the only reason that I get the absurd amount of airtime that I do is because the BBC Charter requires ‘balance’. There are few people who can be anything other than bullish about the market, there aren’t many of them who will get up at 4am to go on the program and of those who are there are only a handful who would make any sort of sense!
“So what is happening?” I hear you ask. Well at a recent Budget Breakfast at Mishcon de Reya I presented my conclusion and thanks to some new research from Lonres.com I was doubtless a pretty disappointing turn for the 100+ property folk who attended.
As you can see from the graphs below, what we can see is that half of all homes sold in the first quarter of 2016 sold in London went for more than 10% below the guide price. Not just in some parts but across central London and across price bands! 60% of the property that did sell in Knightsbridge and Belgravia had it’s guide price reduced prior to selling. The market is on the turn.
Meanwhile, in Wandsworth a client got her home valued by four agents, two recommended asking £3m. Two suggested asking £3.25m but she should expect to be ‘chipped’. The house has been on the market for five weeks at £3.25m and she has not had one single viewer!
The selling agents say that following last months Stamp Duty changes and ahead of the Referendum in June there is really no market about about £1.5m. My friend should either wait until October or if she has to sell then cut the guide to £2.5m. I’m not sure that frankly that would be enough to secure a buyer. I think that in the first quarter of the year London prices above £2m are down 20% and turnover is down 50% year-on-year. Above £5m sales are down 75%!
These is still a market below £1m but for how long? The new-build market I believe is struggling although those involved tell me that it’s all still fine. I think that they are smoking something.
The big question is will the market firm up in July or is the beginning of a downturn. I’ve worked through three property recessions and this feels like a downturn. The problem for my friend and for all those looking to buy or sell is that at present we are parachuting in the dark. We don’t know how fast we are falling and we have no idea where the bottom is.
This is not just a London story. What happens in the Capital ripples out. You may not yet feel it outside the M25 but it’s likely that you will soon. It may take ten months to reach Shropshire but it usually makes it out across the country in the end. So, be warned. Whilst few experts can say it I think that the market may well be on the turn. Would I buy now? Only if I wanted something to live in. I’d recommend that anyone thinking about investing pauses for a moment just to see if you too can feel the wind in your face, gravity tugging at your soul and the impression that the ground may be rushing up to meet you!
“Never blog in anger” they say. Well stuff that! As you can see, I’m pretty cross and here’s why;-
There was a time when estate agents used to run mailing lists of possible buyers, a time when they held the balance of power in the buying and selling game because knowledge (of who was buying) and records (of who was selling and what they paid) wasn’t shared elsewhere. Then came the internet and with it the ability for consumers to by-pass the traditional gate keepers and deal direct. Books (Amazon), taxis (uber), holiday lets (AirBnB), betting (BetFair)… you get my drift? The Land Registry published what people paid for their homes & you could search online without having to deal with a million agents who would invariably send you things you didn’t want.
So along came the internet and with it the rise of Rightmove and ‘property portals’ and close behind them what have become known as online agents or estate agents without shops. Since no-one goes to these shops the overheads are arguably unnecessary but traditional High Street agents argue that they provide great profile and that a local agent is somehow better at selling/letting than a cloud based business. It is not clear that the consumer buys this argument but as is often the case, my industry thinks it knows best.
Ever since the dawn of the Net I have implored agents to maintain their mailing lists or they will end up as glorified listing agents. They will cease to be marketeers and become an eBay-like business collecting interest from adverts and processing a sale. Something that actually online agents do very efficiently. With no USP they would have little to offer and a list of hot buyers when matched with a list of possible sellers was something that the Web would struggle to compete with.
So why am I so cross? Because in it’s wisdom (or lack-of) Savills appears to have decided to become a listing business. Despite being on their mailing list for such properties and even though they know that I might be a buyer of such a property they decided to launch £30m Woolmer Park in an article in the Telegraph. A great article which makes them and their joint agents Knight Frank look very good but which they decided not to alert their hot buyers to first. Knight Frank emailed me the details two days later. Savills three days after that. Still, these things happen. Maybe it was an embarrassing cock-up? Or maybe this is the way things are going?
Today Savills launch Hackwood Park for which I think they are asking
£80m £65m. I’ve know that this property was available for a year and a bit but this is the way that properties of this calibre are sold. There is a very active and very mature ‘grey market’ for such homes and for very good reason. So why would Savills decide rather than go to the effort of pressing a button last night and alerting agents and potential buyers on their mailing list to what they were going to broadcast across the planet this morning?
Because they didn’t think?
Because they don’t have a list any more?
Or is it because that like so many other agents they have forgotten that they are paid a lot of money to sell a home rather than just to list it and process the resulting interest?
I hope that this is all just a series of mistakes. I still believe that a good agent can make a huge difference to what you can buy or sell a property for. The 2.5% fee that they charge is more than made up for the benefit their client gets in a better deal be that just price or in the structure and terms of the deal. These properties are not products on a shelf in a supermarket that you can price by the kilo or square meter. A good agent can achieve a much better deal than a website can possibly achieve because property, like fine art, jewellery, luxury cars and race horses are not a commodity and the owners of such assets are not interested in a tacky ‘click-and-collect’ service. Not in my view, anyway.
Having first announced that people buying a home with an annexe (a separate dwelling) could have to pay the new 3% higher Stamp Duty Land Tax on the whole purchase the Government has decided that this was not what was meant and a ‘clarification’ has been issued. This is the text from HMRC sent to a conveyancing lawyer which is the clearest that I have seen.
“An annexe will only be treated as a separate dwelling for the purposes of the higher rates if it is capable of being sold separately. However, the Government has recently announced that will be made to the Finance Bill to exempt all annexes from the higher rates of SDLT when purchased in the same transaction as a main residence (either a first property or a replacement of a main residence). In this case, the transaction will be treated as only involving one dwelling and therefore, SDLT at the standard rates will apply to the entire transaction. To qualify as a single dwelling the annexe must be within the grounds of the main home and worth no more than a third of the total transaction value.”
I often beg clients to ignore the asking price. To me they are just an indication of the owners greed or the agents ‘enthusiasm’ to get the business. A property is worth what someone will pay for it. It’s up to the seller to decide if they want to take that offer.
Nationally the average home sells for around 4% less than the asking price. People seem to think that it would be rude to offer much less or that the agent wouldn’t take a low offer. Half of all homes don’t sell. Most owners would be flattered to get any offer but most buyers are embarrassed to make what might seem to be a low bid.
I explain to clients, “you make money when you buy, not when you sell. We’re not trying to make a friend, we’re trying to buy an asset. If the agent isn’t weeping as you confirm your terms then you’re probably bidding too much!”. Remember, the agent is legally obliged to put all bids to their client, if the seller is unhappy the agent is being paid to take the grief. They only get paid if a deal is done so many will lean on the seller to take a sensible, well structured offer. If you have prepared properly then you’d be surprised how many sellers will take an offer.
This is a tough market for both buyers and sellers. What is a property worth? It’s worth what someone will pay. The seller can ask whatever he likes, it’s up to you as the buyer to decide what you are prepared to bid.
Sadly there’s only so much an agent can do. Great deals can be put together but it isn’t technically done until contracts are exchanged and the sale goes through to completion. Whilst solicitors were instructed and we were a matter of hours away from exchange in two of the examples I have shown my client pulled out at the 11th hour! Neither withdrew because of the deal itself, each had their own personal reasons and in both cases we were rightly left with a considerable amount of egg on our faces but dealing with that is part of my job. The selling agent had invested a huge amount of energy into making it happen and like the seller no doubt felt very let down. It’s one thing to negotiate a cracking deal and whilst I can take some pride in the work I did putting them together they really only count if they go through.
Some will no doubt claim that the original guide prices were too ambitious, that the selling agents or their clients had been too greedy and that they were never worth the money. You can ask whatever you want for a property and we all know of examples where people seem to have picked a series of numbers at random. My point isn’t that I negotiated a significant discount from an imaginary number it is that it’s always worth negotiating. According to Rightmove the average deal is agreed just 4% below the asking price. The British get embarrassed about making an offer but they shouldn’t. Sometimes it’s worth paying more than the guide price – some properties only come up once in a generation and are worth paying a premium for but most homes have been put on the market with a guide price that the seller expects to get chipped. Do him a favour and make him an offer. The worst that he can do is to say “no”.