Recent reports that the Central London market is overheating have elbowed their way in amongst world cup reports and Wimbledon in the newspapers. I must say, I take my hat off to the PR departments of some estate agencies who have managed to engage their research departments now in their efforts to promote their businesses.
We all know that the vast bulk of so called market intelligence is pumped out buy those involved in selling homes or loans to buy them. The monthly house price indices are a classic example – who after all wants to instruct an agent who thinks the market is going to fall? Despite the prognostication being based on a modest sample of a small number of transactions we are told that prices are once again on the up.
And then along comes Savills.
In the middle of June they stunned their agency colleagues by suggesting that prices for the bluest of blue ribband homes in prime central London may fall by up to 4% in the second half of the year. Now their research department is suggesting that the stagnation has started, that the summer may see prices and transactions stall and that it is prime central London that is most at risk. Can it be that a leopard has changed it’s spots?
Sadly I don’t think so. Like most agents Savills has seen a flood of new instructions come onto the market. April saw new stock up nearly 80% compared to the previous year and like others they will have given sellers hope that their particular home will sell and will sell well. What they need to do now is help these same clients to ‘get real’. There are still good buyers and tenants about but getting finance is tough and the budget last week put some people off the idea of mortgaging themselves to the max. Buyers have some choice now and it’s much harder for estate agents to get them to commit. Some are playing fast and loose and bidding on more than one property at a time so for any business whose income is based on deals being done this is not good news. Sellers therefore need to lower their expectations and prepare to accept less for their property – accept less than anyone might have thought including in some cases the agent!
It’s not all bad news either. The very top of the market is still heading for the stars. Last year there were 12 sales over £25m and just 25 over £10m. Knight Frank have already done more than 20 this year and a record has been set by Beauchamp Estates in Belgrave Square on a property they were asking £80m for. My friends at W.A. Ellis have five people on their books looking to rent somewhere for £20,000 a week but say they can’t find anywhere! Both asking prices and sale prices are back to or above the highs they reached in 2007.
I appreciate that this may look cynical but a downbeat message from an estate agent almost certainly requires deeper investigation. I applaud a firm like Savills who are big enough to tell it as it is and I know that their research department is second to none. Just remember though, when you are reading the view of any commercial organisation take a moment to think through what impact their views might have on their business. Turkeys don’t vote for Christmas, leopards don’t change their spots and estate agents like mortgage brokers only get paid if deals are done. It is more important that things sell than what they sell for.