JUST as it was once traditional to report on the first cuckoo of spring, some of Britain’s indefatigable estate agents have recently been claiming to hear the early chirp of returning buyers. “It is…clear that parts of the market are perhaps beginning to bottom out…Our members are starting to see enquries increase again, as people begin to believe they can find a bargain,” says Peter Bolton King, chief executive of the National Association of Estate Agents. Last month, the NAEA professed to discern “finally…glimmers of hope,” with autumn figures “not as bad as expected” and a rise in the percentage of first-time buyers in the market.
Away from the world of glimmers and expectations, however, the actual figures remain resolutely bad. This week, the Royal Institution of Chartered Surveyors reported that property transactions were at their lowest level since they started counting in 1978 – with London the hardest hit. According to the Halifax, UK prices fell by 15.9 per cent during 2008.
The borough of Greenwich took a smaller hit – 4.1 per cent down in the year to November, according to the Land Registry, and with actually a small rise in November itself. The number of transactions is now so small, however, that this last figure needs to be treated with considerable caution. Figures for SE10 alone show an annual reduction of almost 20 per cent – though the sample here is even smaller, and more fluctuating, and the figures even less certain.
So I thought I’d ask around myself to see whether any of the optimistic noises are matched by the reality of a better 2009. In one place, it seemed, they were. “We’re actually doing very well this year,” said Tony Usher, of King Sturge, formerly James Johnston. “Last weekend was incredibly busy. We’ve seen a pickup in applicants and viewers and we’ve had more investment buyers in the last 14 days than in the whole of the last year, roughly. We’ve tied up numerous sales, in Greenwich and Blackheath, and we’re about to deliver leaflets asking for more properties.”
Asked how many sales “numerous” meant, Mr Usher became rather more coy, declining even to discuss whether it meant single or double figures. He wasn’t allowed to tell me, he said, but promised someone would call me back, which they didn’t.
In all the other estate agents I asked, the only part of King Sturge’s good tidings they recognised was a rise in enquiries. “It’s better than it was before Christmas, which is something,” said Doug Norris of John Payne, probably the most important local agent and someone who can usually be trusted to tell it roughly as it is. “The number of viewings has increased substantially from almost next to nothing in the first three weeks of December. In the 15 days [since Christmas] we’ve been open we’ve arranged about 90 viewings at this branch. It has produced offers, some of which will go somewhere and some of which won’t.”
Mr Norris admitted, however, that the Greenwich branch of John Payne had not sold a single property since the first week of December and only 25 in the last six months – compared with a figure of about 15-20 a month at the 2007 peak. Two houses in West Greenwich are likely to be sold soon – on one of them, in Roan Street, there are three offers. Discounts on already depressed asking prices are around the 5 to per 10 per cent mark. “Buyers are still driving prices down and making random offers,” says Norris. “Vendors are coming to terms with [the falling market] now. Their expectation levels have come down and we can talk about prices sensibly.”
The trajectory is clear in the prices on local agents’ websites. A pretty three-storey end-of-terrace “needing upgrading” in King George Street, the heart of Greenwich’s nicest neighbourhood – the kind of house that might have fetched around £700,000 at the peak – came to the market at £599,995, is now down to £550,000 and is on the verge of finding a buyer at around the £500,000 mark.
A house in Peyton Place, nearby, started off, many months ago, at £710,000 and is still on the John Payne site, now at £599,995, with no offers shown. Many other properties have been for sale for over a year. And prices continue to be cut: a house “needing complete modernisation” in Calvert Road, East Greenwich, on at £395,000, is about to be reduced to £345,000 (the one next door sold last year for £475,000.) “I can’t be bullish about the market,” says Norris. “Not by any shape or form have we turned the corner.”
John Payne handles mainly period property, catering in many cases to established buyers with equity. At Oliver Bond, an agency with many of Greenwich’s large stock of new-build flats and a first-timer clientele, the picture is even worse. “Transactions of Victorian semis are going through with reductions of 10 to 15 per cent, but the newbuilds are being crucified,” says Bond’s Ryan Vella. “Valuers are predicting in some cases 40-45 per cent less than last year’s value. We are amazed at the level of enquiries, but we’re doing viewings but no offers. Once a purchase becomes a serious possibility, the buyers find out how difficult it is. The crucifying valuations combined with the difficulties getting mortgages are slowly killing us.”
Vella has, in fact, sold four properties already this year, although he says they are really hangovers from last year with buyers grimly perservering through all the difficulties. In the last six months, including those four, Oliver Bond has sold just eight properties. As with the other agents, rentals are keeping the shop going.
“I can’t for a moment believe that anyone is rushed off their feet selling,” he says. “Anyone who tells you different is insane.”
It’s easy to see why the NAEA is so keen to claim a bottoming out. No-one wants to buy a home for more than it will be worth in a few months’ time. No-one wants to buy a home that will immediately lose some of its value or (if a first-time buyer) put them into negative equity. The market, here and elsewhere, won’t recover until people feel that prices have reached their floor.
But on this evidence, that may not have happened yet.
Andrew Gilligan;
LBG Plnning Dept is considering a proposal to build a large number of residential units on a site in our community. Please can you advise us as to how most effectively to oppose it?
Thank you,
Tony Norwell 0208 311 0188 0793 9068709
My name is Jason Lamb, and I manage King Sturge Property Consultants in Greenwich. I felt it necessary to comment on this article, in an attempt to address some of the doom and gloom which the press appears to engender wherever it goes. Of course, we have seen a correction in house prices, and the latest indications are that we will probably see prices tumble further until at least mid 2010. In fact, there is speculation that house prices could end up at levels last seen in 2003. So yes, not the best news, granted.
I absolutely concur with Doug from John Payne and Ryan from Oliver Bond that we are seeing surprising levels of activity, but would go further to say that this reflects much pent up demand and people just wanting to get on with their lives. Buyers are generally aware that prices are continuing to fall, and are offering accordingly. Thankfully, in most cases, vendors are also aware that they will probably (and you will see in while why I use this word) not achieve anything like the figure they might have a year ago, and sales are being agreed as a result. In January our Blackheath and Greenwich offices have so agreed no fewer than 12 sales. As I write, there are another three offers pending. Worth also mentioning, however, are two full asking price sales which were agreed in December – a house in King George Street for £825,000 (which also, incidentally, exchanged contracts during the same month!) and another, new build house in Brunswick Terrace for £499,000, which is about to exchange imminently.
Yes, our January viewing figures are also substantially up on those recorded in December (and although we can only report about 60 to John Payne’s 90-odd during the first fifteen days of business since Christmas, this has since risen to 95; importantly, most of the offers received from those viewings have resulted in sales agreed.)
What is apparent is that the current market conditions do not change the simple fact that a surprising number of people NEED to move. Be it a growing family, job relocation, separation or bereavement, there will always be people who will move regardless of price. At the risk of sounding glib, if you can secure an onward purchase at a sensible price, does it matter what you achieve for yours? In most cases it is about making the maths work; furthermore, although it’s not great to know that the value of your home is likely to fall after you have bought it, it is widely acknowledged that the market will recover within the next two or three years. In any case, most people don’t sell again after two months – the average time people stay in their homes in Greenwich is about five years.
Finally, by definition, any market will only recover when prices reach their floor. That may be some time away, and unless the availability of mortgage lending improves I see little change there in the near future. What we can count on, however, is a core of committed buyers who, if we have the property stock, at the right price, WILL buy.
Jason Lamb CertREA FNAEA
Senior Associate
KING STURGE, GREENWICH
Jason.lamb@kingsturge.com
Jason,
But how will the core of committed buyers finance their moves? Banks are broken in this country and the foreign lenders have all left the market. Banks need to deleverage and this process will take years.
Moreover the UK property market has appreciated far too much since the 1980s. Over lay a chart of UK property prices against the Case Schiller US property prices. The UK market makes the US look like a mere blip! I can honestly see property in the UK falling up to 80% from peak values. Markets will only stop falling when the last last forced seller capitulates. These forced sellers will be the banks/government dumping repossessed properties.
Property should only grow at the real GDP growth rate of the country as our population is static and the demographic changes have seemingly slowed. Be a renter and dont have debt!
Hmmm…whilst I don’t profess to be an expert in the field of banking and finance (isn’t it strange how this market has turned everybody into an ‘armchair economist’?) I really cannot see prices falling by 80% anywhere, let alone in London. Demand continues to outstrip supply, and there continues to be a significant number of unencumbered buyers whose finance requirements are negligable. Property, in this country at least, has always been a long term investment and has always shown growth – a correction takes place on a cyclacle basis and usually lasts for a couple of years or so.
I don’t think it’s appropriate to be bullish about the current market, or the outlook – I’m sure there are rockier times ahead – but let’s keep things in perspective!
Hmmm Demand exceeds supply? I have an economics and I am pretty sure that in Econ 101 it taught you that when prices fall it is indicative of supply out stripping demand. Unfortunately markets have been driven for the last 20 years by an orgy of plentiful credit that has been turned off over night.
The point that falling prices mean you just sell your property for less and move to a bigger house for a proportionate saving just doesnt work when the market is totally dislocated and prices are in free fall. Anyone who has bought a house using finance will have to stump up more cash to move as their re finance costs will be much much higher. Moreover people have to repair their own balance sheets before even thinking about taking on additional finance / rearranging mortages etc.
As for property prices dropping 80% why not? They have done in Nevada, which much like the London market was puffed up on cheap credit and a boom in condo building with the economy based on one industry that had crashed. Remind you of anywhere?
As much as middle class dinner party conversations are thrilling, I suspect that the most accurate economic prediction ever was:
“There will be seven fat years followed by seven thin years.”
It is interesting to look at the assumptions made in this article and in other comments:
1) High house prices are good
2) Rapidly increasing house prices are normal
3) In a downturn anyone who sees signs of improvement are at best deluded at worst a liar
On the first assumption, housing is a universal need. Therefore, would it be good for everyone if high quality housing was affordable? What purpose does expensive housing serve? Would it be better for our community if Greenwich was an affordable place to live for people of all ages and incomes?
Secondly, in the long term the value of houses tends to track the level of wage inflation which makes a good deal of sense. However it does mean that rapidly increasing prices are not historically very common.
Conversely, it also means that price falls of 80% of the peak of the market value across the board are also very unlikely. This would mean house prices falling back to where they were in 1986. If we do see such large falls everyone will have far bigger problems to worry about than the falling price of houses.
I know it doesn’t suit the mood of the time to be positive. My favourite coffee shop in Greenwich is shutting on Sunday and Andrew hasn’t written an article on this site without a doom laden headline since the middle of last month.
However eventually, after a good period of time, there will be brighter days. The economy, in Greenwich, London and elsewhere, is not a one trick pony called financial services. Even that industry, with much to answer for, has elements which are thriving even now.
History will no doubt show that the signs of better days are already showing. Albeit ignored, much as the signs of recession were ignored in the last few years of boom.