Ho Ho Ho, Welcome to the Christmas Property Market Update!
‘Tis the season to be jolly, tralalalala la la la la. ‘Tis also the season to look back at the housing market in the year gone by and to make some predictions as to what might happen in the year to come. That, admittedly, is less exciting and less traditional than being jolly. But I’m an estate agent, not Santa, so it’s hopefully not entirely unexpected and I’ll do what I can to keep this Update more ‘It’s a Wonderful Life’ and less ‘Scrooged’. Double dip recession and housing market crash…bah humbug to the idea!
2010 Has Generally Been a Decent Year for the Property Market
Recently released statistics, reported in my November market update, have showed that 2010 has not been quite as good a year for the property market as 2009 in terms of sales volumes. There have also been reports of lower levels of mortgage lending in 2010 compared to 2009. Anecdotally, however, we have been finding that properties have been selling just as quickly, if not more quickly, in 2010 than in 2009. And, perhaps as importantly, we have seen First Time Buyer-type properties attracting more interest than they did in 2009. Indeed, from my perspective that has probably been the most heartening thing that I’ve seen this year. Of course, a healthy property market relies on First Time Buyers being able to buy properties but it also relies on First Time Sellers being able to sell their property and move on up the ‘ladder’, stimulating activity further up that ladder.
Volumes of property sales, according to most statistics, seem to be down on 2009 levels. Indeed, the statistics that I reported in my November update suggest that we are still seeing about half the number of property sales per year that we saw at the height of the market in 2006/07. However, as I said in my last update, I think that for a few years to come this might just be the new reality of the property market. Equally, it might be that this lower level of activity is not something to be concerned about. After all, a lot of transactions in 2006/07 were borne of unsustainable lending practices and a belief that property trading was a way to make a fast buck rather than being a long term and steady investment in a home or rental property. Perhaps 2009/10 have seen us return to property being ‘safe as houses’ in investment terms, rather than a short term gold mine. And, after seeing the consequences of people buying at the wrong time in a ‘boom and bust’ property market (negative equity, financial ruin), I’m tempted to see stability and perhaps even stagnation of property prices for a while as being welcome.
Has Press Coverage of the Property Market in 2010 Accurately Reflected What Has Been Happening in Reality?
The reporting of the property market in the newspapers in 2009 gave me some cause to be grateful. 2008 saw a lot of journalists seeming to revel in the bad news surrounding the property market and property prices. 2009 saw more balance and this, I felt, helped to restore a bit of confidence. 2010 has seen a bit more of the type of reporting that we saw in 2008, with many elements of the Press seeming to enjoy scaremongering around the prospect of a double-dip recession and double-dip in property prices. Very often the same journalist is writing a piece one day about prices rising and within days they are writing another piece about the prospect of prices falling. I’ve likened it to the way the Press reports Charlotte Church’s weight gain one week and then fears over her weight loss the very next week. The tone of the Press with regards to the property market in 2010 has, I feel, been more negative than in 2009 and I hope that in 2011 it will return to the way it was in 2009 as the property market is a confidence-based market and unnecessarily negative reports, based purely on speculation or misuse of statistics, does nothing to help maintain a healthy property market recovery.
So, Most Importantly, Have Properties Actually Been Selling in 2010 and Do They Continue to Do So?
Most importantly, properties are still selling. And property sellers still have confidence that they can sell their property and are bringing properties to the market. 2010 has been a fantastic year for my own firm and I’m really proud of everything that we have achieved against a backdrop of what remain very challenging general economic conditions. That wouldn’t have been possible if the property market wasn’t moving.
Properties ARE selling! Buyers have more choice than they did a few years ago and can afford to be a bit more discerning. Obviously location is important and properties in the most desirable areas are still in high demand. Good properties in good areas are still selling. However, across the board there are buyers for every type of property. The key is to make sure that your property stands out from the crowd…in a good way! Properties that aren’t in very good decorative condition and which would have sold a few years ago are now struggling to sell. However, if your property is a great example of its type then the chances are that it will sell as long as it is sensibly priced against the competition. So, take it from me, in spite of what some estate agents (of all people!) are telling people when they visit their properties, properties ARE selling! In the last week of November, traditionally a quiet time, we sold five properties, all of different types. Our average time on the market is under two months. There is plenty of doom and gloom around, but there is also good news…you just need to know where to look for it!
So, What Are My Predictions for the Housing Market in 2011?
On paper, it looks like 2011 should be a tough year. The Government’s spending cuts were announced in late 2010 and tens of thousands of public sector jobs will be cut. It continues to be a tough economic environment for businesses. We’re all going to be less well off in the coming years than in previous years and many people at the moment can only afford to remain in their homes because their mortgage payments are affordable due to historically low interest rates. So it’s a very gloomy outlook for the housing market for the coming year, isn’t it?
Well, I’m not totally sure that’s the case to be honest. Everyone has known that cuts have been coming for some time and the fear of cuts will have informed people’s decisions in the last couple of years as to whether or not they want to move home. The flip side of this of course is that people now know where tey stand. Therefore, many people who may have been waiting to see just how severe the cuts would be and just how much the cuts would affect them personally know exactly where they stand. This may in fact give them some confidence that they can afford to move home. The housing market, certainly on the east coast of Scotland, seems to have defied logic in the past couple of years when it comes to the relationship between house prices and the general economic conditions. I think therefore that anyone’s guess is as good as mine as to what will happen…so, in spite of that, here are my guesses as to what will happen in the Scottish property market in 2011…
- property prices in Scotland and throughout the UK will rise very slightly or stagnate because interest rates will remain untouched for several months to come and there appears to be no prospect of lending conditions for property buyers changing dramatically;
- the outlook for first-time buyers is unlikely to improve dramatically over the next 12 months on the basis that the lending conditions for first-time buyers are unlikely dramatically to improve in that period which will lead to a property market relatively similar to what we have had in 2010;
- the proposals in the Financial Service Authority’s mortgage market review will probably have a short-term adverse effect on the market and on First Time Buyers in particular as the intention seems to be to impose far more affordability tests than we have previously seen however, in the longer term, these regulations should help prevent people buying properties that they cannot actually afford in the medium to longer-term;
- interest rates will remain very low for the coming year because low interest rates have been one of the most important factors in minimising the effect of the recession on the UK population in the past couple of years and the effect of raising them significantly in the short term would lead to a repossession crisis amongst the thousands of people throughout the UK who have been able to remain in their properties because of low interest rates;
- the Scottish Government and UK Government, as far as I’m concerned, should not do anything to artificially stimulate the housing market in Scotland: instead we should aim at a general economic recovery which will see us return to normal but responsible lending conditions which will ensure that the health of the housing market takes care of itself;
- some months will be better than others from the point of view of house prices and the Press will report how wonderful things are one month and how awful they are the next;
- transaction levels will remain at roughly the same level they have been at in 2010;
- repossession levels will probably not go up as dramatically as everyone has been predicting for the past couple of years, simply because interest rates will probably remain low for several months to come and new legislation continues to make it increasingly difficult for lenders to repossess properties;
- 2011 will continue to be a buyers’ market. We will therefore continue to see an emphasis on Offers in the Region of/Offers Around and Fixed Price asking prices in 2011 with the asking price reflecting the Home Report value. Offers Over might continue in high demand sectors such as the market for family homes in very popular residential areas but otherwise is a bad idea because buyers don’t like it and property sellers would be well advised to do everything to make their properties as attractive as possible to buyers given that it’s a buyers’ market;
- Home Reports, in my opinion, continue to underpin the housing market in Scotland: they are probably the most crucial factor in determining the asking price and they also give buyers some confidence that the property is actually worth what they are considering paying for it. Two things will ensure that they continue to be effective: (1) surveyors’ valuations need to be audited and checked for consistency to ensure that buyers can continue to have confidence that the valuation in the Home Report is actually accurate, and (2) lenders need to continue accepting the Home Report for the purposes of the buyer’s mortgage, which saves the buyer money and makes the purchase more affordable than if they had to instruct their own survey/valuation.
2010 Wrap-Up: Have a Very Merry Christmas and a Wonderful New Year!
I hope that, in spite of all the negativity that you can find amongst other estate agents, the Press, the man/woman on the street, you will have found that some of my property market updates in 2010 have been cautiously optimistic and that they have reported not only what I have been seeing in the Press but also what I see happening in real life from my privileged position of running an estate agency business and that they will have reassured you, perhaps, that the property market isn’t such a bad place as some people make out.
Most importantly, I hope that you will have a wonderful Christmas and a very happy New Year and I look forward very much to chatting with you all again in 2011. Here’s wishing the very best of health and happiness to you and yours for the festive period!