Over the last few years demand from purchasers has very rarely been matched by the equivalent supply of houses for sale. This has resulted in the constant upward pressure on prices that we have become accustomed to. So far this year the supply side is increasing broadly in line with demand – which means we have a state of equilibrium. The market is flat. After so many years complaining about the heat and pace of the market you would have thought the broadsheet press would have welcomed the current scenario, rather than vilified it. Contrary to popular belief I believe the situation today is a perfectly acceptable one. Secondary or compromised property is sticking and whilst conditions are better suited to buyers rather than sellers, even this plays out differently in all the sectors and regions that make up the entire market.
Whilst there is still hesitancy and caution – there is also a sense of realism and acceptance. Dark clouds are on the horizon but severe weather is not expected.
There are caveats to the weather forecast; such as the ongoing debacle over the non-dom tax. The top end of the market would be extremely vulnerable if the Chancellor was to do something stupid. The extent of the credit crunch has yet to be identified, but it will certainly affect the City bonus pool for 2009. Is the US in recession? And if so, does that lead to similar conditions here? There are also question marks over affordability in relation to both interest rates and mortgages – fewer mortgages are available today and far greater restrictions on those that are. This is already affecting activity across the mainstream market. It remains unclear which direction interest rates should head as the MPC face a difficult state of affairs – inflationary pressure at the same time as slowing economic growth.
Nevertheless, life goes on. Every day people are still being born, moving to the UK, getting divorced and dying – the housing market never shuts down. Aside from the sanity of the Chancellor, the top end of the market is relatively well insulated from hitches in the mainstream market.
One of the sectors Garrington has been particularly involved in over the last few years is the family house market, circa £2Mil – £4Mil. Whilst our clients tend to be in positions from which they can proceed quickly, we are currently experiencing the build up of chains of transactions. This is particularly evident in traditional family areas where the majority of people need to sell in order to buy. Chains are becoming more fraught, delayed completions common. It is our clients’ ability to proceed immediately that has enabled us to secure several properties at favourable prices, despite the existence of higher offers being on the table.
Also noticeable across the country, and in some part related to the chain situation, is a greater willingness of home owners to sell up, deposit cash in the bank and move into rented accommodation. Being out of the market in its current state is not a particular concern and the ability to return as cash buyers not in a chain can be of great benefit.
Looking forward, we are not predicting dramatic changes to the markets in which we work. Supply is at reasonable levels in the London market and just beginning to arrive in the regions. We do expect total numbers of buyers and sellers to increase following an early Easter, but these numbers are likely to do so in tandem; which means although there will be more people involved in the market than now, prices will remain static.
7th March 2008