Real Property Prices
Current Market: If you are not motivated to sell, stay where you are!
Understanding what is happening in a Summer property market is always difficult due to the impact of the holiday season, so August typically shows lower volume sales than other months, albeit it can be one of the busiest times for people to physically move having concluded sales in the Spring. This, coupled with the poor economic news of trouble in Europe, the USA being downgraded from its triple AAA rating, economic growth in the UK being worse than forecast and the stock market tumbling from nearly 6,000 to 5,000, could have caused the property market to stall dramatically.
The following data and anecdotal information from market professionals initially suggests buyers and sellers are becoming more immune to "bad news". They know from their perspective they need to move. Whatever is happening in the wider economy, for a buyer or seller they are moving because their family circumstances are changing. Death, divorce and debt as well as newly formed and expanding households need to move and those that can afford to do so or are forced to due to financial pressures, keep the property market moving.
For Sale Sign Analysis shows the percentage of properties being sold versus those that are for sale is weaker this year, although interestingly, this time last year we saw the market softening and indeed it appears that the market is so far this year, following the same pattern. With only two and half in every ten properties for sale securing an offer, you have to be motivated to sell your home, or it's unlikely to happen.
The latest data from Hometrack indicates the market has had a small uplift this year, but this is now starting to stall. Interestingly their data suggests the time to sell a property is falling slightly this year, suggesting sellers are more willing to do deals to secure a quicker sale. Hometrack comment "demand fell in August largely due to seasonal factors, but we expect this to weaken further as consumer sentiment remains poor".
Regional variations continue to be the real difference between this credit crunch property recession versus the 1990s. For example, Hometrack note "In London the time on the market (6 weeks) is around half the level seen in Wales, North West and Yorkshire & Humberside regions (11 weeks)."
The National Association of Estate Agents data suggest more buyers were looking over the summer than last year (contrary to Hometrack's data) and sales per branch fell from nine to seven, although this is normal over the holiday period. NAEA comments: "Supply levels across the country decreased slightly with NAEA agents reporting 70 properties available per branch, down from 74 in June. This is still higher than year-on-year figures where in July 2010, only 68 were recorded" but suggests fewer people are looking to sell their property.
Data from estate agent members of the Royal Institute of Chartered Surveyors shows market activity is weakening. Fewer buyers registered in August, although sales at 14 per branch were maintained. Probably the biggest difference is the lack of stock for sale which for the first time this year has fallen slightly below 2010 levels.
The RICS asked their agents/surveyors what was holding the market back and "most cited factor was the general level of economic uncertainty (78% identified this factor), with lack of mortgage availability coming in a close second (66%)." The responses varied regionally with "surveyors in London most cited lack of stock (74%) as a reason for the subdued housing market. However, in Northern Ireland where price falls have been particularly severe, fear of further declines was the most cited factor."
So far, the summer seems to have had an adverse effect on the number of properties for sale. The indices suggest conflicting reports on whether buyers' confidence to purchase has been affected as much, but it is likely that the fall in stock levels could again save the market falling much further for the rest of the year, as long as enough buyers remain keen to purchase.
Anecdotal evidence from estate and letting agents suggests that confidence from the property investment community, particularly with buy to let investors who invest for the long term is coming back. This is helped by more competitive mortgage offers from an increased number of lenders coming into the market. Although the levels of activity aren't enough to drive the market forward, it will help to provide sales in some areas.
Another positive effect that buy to let finance has on the market is it helps people who can't sell to move by taking out a buy to let mortgage on their existing property and another mortgage on the new property. Without this facility, a lot more people would have to drop their prices further to secure a sale.
For sellers outside of good performing London areas, it's time to decide if you really want to sell or if you need too much money to achieve your move and are therefore better waiting until the market picks up. The trick to selling in the current market is to price aggressively against the competition to secure viewings and one or multiple offers.
For buyers, everything suggests you can afford to take your time this year and bargain hard - unless you are in wealthy London suburbs and/or fancy buying a fairly unique but popular property in economically successful areas.
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