Like summer itself, the property market lately has proved a flop. Pretty
terraced houses that would have been snapped up in the spring sunshine
languish on the market. There is a forest of “for sale” boards up, but few
that say “sold”; and many people who rushed to sell their homes in late May
and June, to avoid paying for a home information pack (they finally become a
reality for four-bedroom homes on Wednesday), have yet to get a nibble.
Even estate-agent speak is changing. The talk now is of “repositioning” –
cutting the price – and they are chasing “offers in the region of”, not
“offers over”. But there is one group of people for whom none of this is bad
news: indeed, they’re overjoyed.
“We’ve entered a buyer’s market,” says Lucian Cook, director of residential
research at Savills, the nationwide estate agency. “It is a turnaround since
the beginning of the year: three months ago, it was definitely a seller’s
market. The average homeowner is going to have to take a more realistic look
at the market this summer.”
Matt Mannall, an associate partner in the Henley office of Knight Frank,
another nationwide group, agrees. “For the first time in ages, buyers,
especially if they are cash- and chain-free, are in a strong position.”
It is one that they have not been in since 2004, although industry analysts
say the signs of a market reversal have been looming for a while.
Admittedly, on the wide, tree-lined streets of Ken-sington and Chelsea,
house prices have risen by 32% this year, according to Knight Frank; outside
prime central London, however, the picture is rather different. Both the
Royal Institution of Chartered Surveyors and the National Association of
Estate Agents report falls in the number of new buyers, who are being put
off by rising interest rates, ever higher prices and, lately, the dismal
weather. Allied Surveyors, the UK’s largest independent firm of chartered
surveyors, says that the market has turned in the past fortnight, and that
“it’s more doom than boom”.
Figures from the housing-market analyst Hometrack (see graph, below) show that
in the past two months, the average time it takes to sell a property has
risen sharply. In greater London, it is no longer two weeks but three; in
Wales, it is nine and a half – three times as long as it was just nine weeks
ago. “London has put a gloss on the figures for the past 12 months,” says
Richard Donnell, Hometrack’s director. “Prices have been driven by a
shortage of stock and strong demand. Now that this is no longer the case,
the froth is coming off. The home-grown national market is definitely
slowing in the East Midlands, the northeast and Wales. Even your average
family terrace in a less fashionable part of London will start to feel the
pinch.”
The significant slowdown started at the beginning of June as interest-rate
rises began to bite. “The market has slowed dramatically, especially in the
£700,000-£1.5m market,” says Robin Thomas, a partner in Strutt &
Parker’s Exeter office. Mannall agrees. “Houses that a couple of months ago
were valued at £925,000 are £895,000 today, and a £550,000 house is now
£500,000.” It is this mid-mainstream market that is particularly affected –
this is a slowdown we are experiencing, not a crash – so there is still
little joy for first-time buyers. People who have sold up in one of London’s
smarter postcodes and are hunting for their country-house dream, or those
leaving a southern suburban semi to return to their northern roots, are in
the strongest position.
So, how best can potential buyers take advantage of the situation? The first
rule is: shop around. There are bargains to be had, particularly if you are
flexible about location. The price of a beautiful Grade II-listed
yellow-stone house near Broadway, in Gloucester-shire, for instance, has
been reduced from £875,000 to £830,000 (with RA Bennett; 01386 852456, www.rabennett.co.uk);
a four-bedroom barn conversion near Quainton, in Buckinghamshire, is down
from £665,000 to £640,000 (with Jon Drew-Smythe; 01296 658270, www.jondrew-smythe.co.uk).
Even in the ever-popular southwest, Glebe House, an eight-bedroom,
six-reception Victorian property in Chud-leigh, 10 miles from Exeter, on
sale with Strutt & Parker, has seen its price fall by £75,000 to
£750,000.
If you want to buy back into the capital, you may have to compromise on the
location and number of bedrooms. Even so, buyers can find reductions: a
three-bedroom house in Clapham, southwest London, for instance, has been
reduced by £25,000 to £725,000 (with John D Wood; 020 7228 0174, www.johndwood.co.uk).
“Traditionally, people have this view that everyone disappears in August, but
I don’t think that will be the case this year,” says Ed Mead, a director of
Douglas & Gordon, a London estate agency. “There will be lots of canny
buyers hanging around. Anyone who sold up earlier in the year is waiting to
capitalise on the weakening market. As a cash buyer, they will be in a
strong position.”
The next step, says Mannall, is to investigate the motivation of sellers. “If
they need to shift their property before September, and you can move
immediately, offer 5% below. Or, if you’re willing to be flexible about the
moving date, try for 10% less.”
How long is the slowdown likely to last? Savills does not expect the
mainstream market to pick up significantly until the second half of next
year, even if interest rates don’t stay above 5.75% for a prolonged period,
with a peak of 6.5%. That means sellers, too, must rethink their strategy,
as James and Belinda McElvie, who are trying to move within North
Yorkshire’s “golden triangle”, know only too well.
When they first put Ebor House, an attractive four-bedroom home overlooking
the village green in Nun Monk-ton, on the market in May, the sun was shining
and house prices were rising. Seven weeks later, the McElvies, who have two
children, Lottie, 4 and Phoebe, 2, still hadn’t received an offer. A
fortnight after that, they slashed the asking price by £25,000 to £750,000.
“I don’t think we were being greedy,” says James, 43, a commercial chartered
surveyor. “We had four valuations and chose a middle one. We thought it
would sell quickly, but it seems the market is much harder than it was.”
Belinda, 42, is equally nonplussed. “We had a lot of viewings, but no offers.”
she says. “It wasn’t what we expected. All our plans are on hold until we
sell.”
Will their price cut be enough to tempt potential buyers? “You have to be bold
about it,” Thomas says. “Knocking £10,000 off a £900,000 house isn’t going
to make a difference. You have to encourage new buyers and place it in a
different price category.
“If vendors wish to sell, they have to be prepared to accept offers at a lower
level than they could have hoped for a month ago. Vendors should accept
offers at the guide price and not rely on competition to push the price up.”
Donnell is even more blunt. “If you need to sell in the next couple of months,
then you need to be realistic,” he warns. “Sellers may have to take quite a
hit.”
Additional reporting by Lucy Denyer
Tips for buyers
- Be prepared before going in to cut a deal. Do your research on the local
market and find out what properties are really going for, not what sellers
are asking.
- Get to know the seller. Ask the agent why they are moving. Do they need to
move before the school term starts? Have they had an offer accepted on the
house they want? Use your cash advantage if you are chain-free, or any other
flexibility you have to your advantage.
- Register with umbrella websites such as Rightmove, Primelocation and
Propertyfinder for automatic updates on new properties – and publicised
reductions. You will be able to see whether a house you viewed two months
ago is on with another agent at a reduced price.
- Be tenacious. “By nagging the agents, you can get to view things that are
not being launched until September,” advises Cliff Gardiner, head of London
buying for the propertyfinder The Buying Solution. “Hound them.”
- See the summer as an opportunity. “The likelihood is, if you like it, the
other two buyers who might also have liked it a month ago are now away on
holiday,” says Lindsay Cuthill, head of Savills’ Fulham office.
Don’t get complacent. You should still be prepared to move as quickly as you
can – and to pay a premium for prime property.
Tips for sellers
- Time for Plan B. Are you prepared to sit it out and wait until the market
catches up (it could be next year), or do you need to sell now? If you
really need to move on, decide what kind of offer – both in terms of money
and moving date – you are willing to accept.
- Be realistic. If your property has been on the market for three or four
weeks in town – or three or four months in the country – and you have yet to
receive an offer, drop the price by 10% or more, says Sarah Beeny, the
Sunday Times columnist and presenter of Channel 4’s Property Ladder.
- Yes you have heard it before, but declutter, tidy up children’s toys, pack
pets off to the garden and roast coffee beans to create a welcoming
environment. Make the most of the garden and clean the windows to let the
sunlight in.
- Prepare yourself: consider holding off bringing your property to the market
until September, when people are back from holiday. Use August as a
preparation month. Now is the time to make sure that your property is in
immaculate condition, and to get some decent photographs taken, inside and
out, so you can hit the ground running.
- Remember, everything is relative. Yes, you might be selling for a lower
price than you had hoped to get, but you should be buying another property
at a lower level as well.
