Current Market: 2012 a Good Year to Buy?
House Prices 2012
This year the usual doom and gloom merchants Capital Economics and Jonathan Davis are still saying property prices will fall by 5% (CE) or up to -12% (JD). These two companies typically give ‘downbeat' forecasts about the property market.
Other predictions suggest property prices will rise by up to 3% (Savills). The CEBR correctly predicted small falls in 2011 and then prices rising around 14% up to 2015. Although this sounds alot, over a five year period, this means an average growth of just under 3% per annum, which means house prices potentially won't keep up with current inflation levels of 4% or more. Hometrack predict house price falls of around 3% in 2012.
So, depending on whether we hit an economic recession in 2012 and how deep it is will determine whether prices show a little bit of growth or a small decline. If things get really rough with high unemployment levels, a sharp rise in repossessions and say a rise in interest rates, then it may be that the real doom and gloom forecasts of 5% or more falls could exist by the year end.
The following data and analysis helps us to understand what might happen over the next few months in the property market. However in view of the regional differences, it is essential to consult local property experts and not rely on national data which could give you a completely skewed view of the market.
For Sale Sign Analysis measures the number of boards which are sold versus the number for sale and is a good indication of what's currently happening in the market. In 2011, the lowest figure was in May when only one in every five properties was for sale. Using a normal market as a comparison, we'd expect 40% of properties to be sold versus those for sale, so the market at this time was very weak. On average throughout the year, the market hovered around 25%, ie for every ten homes for sale, only two and half were sold.
However, those that were for sale and looking to move seemed on average to do better towards the end of 2011, with the average number of properties sold reaching nearly 30% (ie one in three), a performance not seen since May 2010.
This data probably shows the starkest difference between areas though, with areas such as Altringham and Hale, Retford and Halifax selling less than one house in ten, suggesting a tough selling market, but good buying opportunity. At the other end of the scale, areas such as Battersea and Clapham, Harpenden and Berkhamsted are selling five properties for every ten for sale, suggesting their markets are in recovery.
Board counts are something you can carry out yourself locally, see page 5 for more details.
The latest data from Hometrack suggests the market is slowing from the start of 2012, with "buyer registrations and sales... falling... and the underlying trend is one of tightening supply and weakening demand". On average, if a property is marketed at £125,000, buyers are offering £115,625 (92.5%). This doesn't vary that much from one region to another suggesting agents are marketing properties at prices the properties will sell at. With a balanced market typically giving a 95% offer to marketing price, the current market is more of a buyers' than a sellers' market.
Information from estate agent members of the Royal Institution of Chartered Surveyors shows quite a positive figure with more buyers registering while property stock levels remain at around 70 properties per agent. Concluded sales appear to be holding up well at over 15 properties per agent, per month.
The RICS view on the market in 2012 is "The forward-looking indicators continue to tell a broadly similar story to that signalled for much of 2011. Price expectations remain slightly negative". In other words there is a downward pressure on prices, but surveyors are typically reporting either price stability or falls of up to 2%.
For those looking to sell their properties, on average it is likely to take 10 weeks, but this varies dramatically from one area to another. Areas such as Guildford, Bristol and Milton Keynes are selling within five to six weeks while other areas such as Lincoln, Carlisle and Stoke are taking up to three months.
Hometrack data also indicates the number of buyers registering is down, but this is coupled with less properties coming onto the market, so not likely to cause a rapid decline in prices, but Hometrack comments that the data points to a "further downward pressure on prices in the months ahead".
The National Association of Estate Agents measure how many buyers and sellers complete transactions per member agent. For 2010, the average agent sold around seven properties, while in 2011, this actually increased to eight. The market weakened towards the end of the year, with five to six properties being sold, but this just reflects normal seasonal lows and was on a par with the end of 2010.
Despite slightly lower sales lately, the number of buyers registering with NAEA agents was up year on year and month on month, suggesting that there is interest building for 2012, although this is in contrast to Hometrack's data which suggests the number of buyers registering is on the decline. Perhaps the slowdown in shop sales in the run up to Christmas was partly due to determined buyers still on the hunt for a property!
NAEA President Wendy Evans-Scott said: "It is pleasing to see that prospective house-hunters remained determined to continue their search for a home despite the slowdown we normally expect to see at this busy time of the year".
What does the Current Market mean for Homeowners, Buyers, Sellers and Investors?
The current market suggest that for homeowners, nothing much will change this year unless you are in a tough area where property prices are falling 5% or more - such as Hartlepool, Blackpool, Carmarthenshire, Hull and North Lincolnshire. Owners of properties in these areas are more likely to find equity is being squeezed which could impact on their ability to re-mortgage their properties.
In other areas such as successful parts of London, the market is buoyant and homeowners can look forward to natural property price growth.
For buyers, in the main, the market will play into your hands as there appears to be more properties coming onto the market than there do buyers. However, the number of properties available for sale is still low, so although you could get a bargain, it may be tough to find the right property and when you do, with so many micro markets developing at the moment, you might end up having to compete to secure it.
For sellers, it's all about understanding not just the local market but also the market for your individual property. Board counting is a useful way of doing this, just as For Sale Sign Analysis carries this out on a regional basis, so you can check how many similar properties to yours are for sale and how many are sold. If you are in a market where more than four properties out of ten are sold, it's potentially a good time to sell, if it's down around the one in ten, then you are likely to have to price keenly and have to wait a few months to secure a sale.
For investors, most areas across England and Wales should be quite attractive. Properties are sticking on the market and some sellers are likely to become desperate to move on this year, whether they are trading up or down. For those sellers that have the equity to be able to sell at a discount, investors can pick up a bargain. But, as stock levels are low, if you want to find a bargain, be prepared to do a lot of leg work looking at properties. You won't be able to view a few properties and then make a cheeky offer. Finding a property where the deal stacks up could take you six months to a year and you are likely to have to look at over 100 properties to find a good investment.
Finally, all investors should be wary of companies offering ‘below market value' properties, many of these are sold to novice investors who don't know how to research prices properly and some have ended up buying a property which doesn't necessarily have the discount they thought it did. Never buy a property without viewing it first!
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