‘Tis the season for market predictions. Time then to hand you the chainsaw and to crawl out onto the branch of house price predictions!
Having confidently predicted the peak of the market at Christmas in 2006 I must accept that some humility must be shown for my erroneous suggestions that 2010 would show a ‘double-dip’. Whilst I see many examples of deals being done at way below asking price the market indices do not show the anticipated falls of 20% or more and it is with some trepidation therefore that I prognosticate on 2011.
I see little evidence to suggest that the falls I had expected to turn up this year will not show up eventually. Sale volumes are wafer-thin, the gap between average asking prices and average sale prices is close to record highs (over £70k) and the deals being done – especially those outside of gated community inside the M25 suggest that those people who have to sell are considering much lower prices than their asking price suggest.
Remember the market stats I produce each month. These are the raw numbers;-
• There are nearly 1m homes for sale today.
• 8m people are looking to buy a new home (some clearly more eagerly than others!)
• New stock is coming onto the market at the rate of 3,445 a day but only 2,355 are selling.
• Put your house on the market today and you have just an 8% chance of selling by Christmas.
• At these rates if you put it on for the whole of next year you still only have a 35% chance of selling it!
Much as the score in a football game doesn’t always reflect the true course of the entire 90 minutes we all accept that there is no one ‘average house’. I still regard the monthly reports from Land Registry, Halifax, Nationwide and Rightmove as the easiest ways to measure and to illustrate the health of the market although I can sympathise with those who would like to hive off parts like ‘Prime Central London’ for example. Whilst banker bonuses should keep the prices up in SW3 there are 23 million homes in the UK and most are not in Chelsea! If you want to know how over-priced Central London is then consider that yields here are now around 4% gross! Just 4% for an asset that is illiquid, costly to trade and that will get even more so when stamp duty rates for homes over £1m rise next Spring to 5%!
There is no evidence of lenders lending rather than hoarding in fact the latest numbers from CML and British Bankers Association suggest that lending is still declining. Government cuts are yet to really bleed as those who have over-stretched themselves are hanging on only because of record low interest rates. Down the track when the Coalition Cuts bite we can expect thousands more students for example to be repaying their student loans once they are earning £21k rather than saving up a deposit for a house. The average age of a first time buyer is already 34. Just how long can the purchase of a home be put off?
Opportunities will of course appear and with my buying agent hat on I expect to be even more of a carnivore in 2011 than I have been this year. However, it will only be those who already have money that will be able to take advantage of the deals that come along next year. If you need to borrow then you need to get saving and that will typically require £35k out of taxed income! Average pay will fall from the £24,000pa today making this a very tough ask. You can see why renting may be the new black!
As always, my professional colleagues have a view. Savills see the market fragmenting but overall seem to see prices down 10% by the end of next year. Catherine Penman at Carter Jonas thinks -3%, Jackson-Stops & Staff also feel that 10% will be the fall that most see. Hamptons see Prime London up 5% but 4% falls across the UK. CEBR thinks prices will RISE 2.2% next year and 16% over the next 4 years. CB Richard Ellis thinks we will see “moderately declining prices” and Cluttons thinks prices will end 2011 just 0.1% below where they start the year.
Below is classic example of what I think we can expect to see more of through the next 12 months. Received by email from Knight Frank last week although I have had similar from any number of other agents. We are demonstrably chasing prices down and as I have said before, “it’s like skydiving at night – hard to know how fast we’re falling or where the bottom is!”
In summary, my predictions of next year are;-
Main indices down 10%+ by end of 2011.
Volume of sales down from 890k to around 700k by end of 2011.
Email received from Knight Frank.
In respect of the following instruction, we have been informed by the Receivers that they would look to accept offers over £2,700,000 (subject to contract). This is a reduction from £3,200,000 and is to prompt a quick sale of the property.
Please contact us if we can offer any further assistance.
A fine Grade II Listed House set on the Historic Tyntesfield Estate
Address: Belmont House, Belmont Estate, Wraxall, Bristol, North West Somerset, BS48
Guide Price: £2,700,000
Elevated with outstanding views beyond the Mendip Hills, yet located within easy reach of the popular Clifton Village. 4 reception rooms, 9 bedrooms. Gardens and grounds. Pasture land and woodland. In all about 220 acres.
7 to 9 Bedrooms, 3 to 5 Reception Rooms, 6 Bathrooms, House, Farm/Estate, Period, Detached, Basement, Ground Floor, First Floor, Second Floor, Garden, Land, Rural, Listed, Secondary accommodation, Private Parking, 12121 Approx Sq ft, 220.05 Acres
For more information on this property please visit our website: http://www.knightfrank.co.uk/CHO100128