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BEWARE THE HEADLINE GRABBING SOUND BITE
This is a very confusing time for those considering or presently involved in the selling or purchasing of a residential property. Depending on the media, tales of a stagnant market one day are followed up the next with a story of a multi-million pound sale and reports of percentage drops in volume are mistaken for a decrease in value.
In a parallel market, the art world is experiencing record sales of living and dead artists at auction and along with inflation various commodities are increasing enormously in value.
Here are some of the headlines I have noticed over the last few months:
"Disruptive Asset Bubbles"
Watching an analyst on Bloomberg last week giving his opinion on the present financial situation, I nearly fell off my running machine when he said that "disruptive asset bubbles" were the cause of the financial turmoil.
Personally, as a negotiator that has seen my fair quota of boom/bust cycles over the last 35 years this was a new phrase to me. It came from the mouth of a young man who had not only ever worked under a conservative administration but had certainly never worked through any downturn of the '90's, '80's or '70's.
"A Steady Decline in Growth"
A report in February 2008 on top houses in prime central London from one of our leading residential estate agents said that "the overall trend is one of a steady decline in growth". This was after acknowledging that prices were only 20.4% higher than they were a year ago and that was down from a previous 40% before the credit crunch took hold in the summer of 2007. This was taken up by the press sub editors as "Freeze in Prices of Top Houses"
"40% decline in Volume"
The latest report from Surveyors across England & Wales suggests that the volume of houses sold this year could be 600,000 sales which will be 40% down on 2007 (which was down from 2006 with around 1.25 million sales).
Compare this to the boom of 1988 with nearly 2 million transactions and the bust of early 1990's of 1.3 million transactions and we are in the worst market most young commentators and analysts have ever known – in volume terms!
Now you will see more articles of the closure of estate agency branches throughout the country but the best will flourish in a more challenging market and the "customer" will get a far better service as the "old hands" move back into the front desks.
Asking Price Reductions
What ever the economic cycle in the markets the three "D's" being Death, Divorce & Debt will bring property to market. Every day people are trading up or trading down for personal reasons whether in a positive or negative way. The most difficult aspect of any sale at present is obtaining the best advice from estate agents - the spread of opinion as to value is widening.
Bank Mortgage Valuation -Very cautious for lending purposes
Open Market Valuation – Based on market evidence of sales
Marketing Valuation – Based on how much the agent wants the instruction!
One agent's price reduction is another agent's original opinion of value. Beware the agent with the highest price and the lowest fee as in low volume markets judgements can become cloudy. What appears to be a 10% mark down is more a correction to market value.
Supply & Demand
Although there is a lack of volume in the market the ratio of supply to demand is about level in the prime residential central London market. Across the country however the stock levels are rising and slower sales influenced by availability of debt finance. The prime and super prime residential market for central London above £5M is still strong but with the exception of the very top of the process of sale is taking longer to conclude but the value is still there.
Conclusion
In some cases the sales have stalled in a "Mexican standoff" with buyers declining to increase offers whilst vendors are resisting a drop to do the deal.
This is a time for experienced negotiators who understand the full implications of the market, who have had experience in similar markets in previous cycles, who can give informed advice and nurture through the deal to a successful conclusion with both buyer and seller pleased with the outcome.
Today is the tomorrow you worried about yesterday – it never happened!
Wetherell's view on the Mayfair market is that we are currently taking on our usual number of properties across the price spectrum for selling in the summer market and we are confident that correctly priced property will sell. Time will tell if we have read the market right!
