Nothing. Seriously. There’s nothing whatsoever wrong with the UK property market.
News of the demise of buyers and an absence of mortgage lending as one of the causes have been greatly exaggerated.
But hang on, residential transactions are half of what they were in 2007 and prior. How can it be that there is ‘nothing wrong with the market’?
First, let’s consider some facts. Supply certainly isn’t an issue. Rightmove, the UK’s leading property website, says that it lists 132,000 properties for sale each month and covers 90% of all estate agents in Great Britain. The consequence is a national stock of properties for sale of well over 1 million homes. So there’s no shortage of choice, that’s for sure.
However the perception that the property market is lousy is of course based upon the view that there is simply a ‘lack of buyers’. According to the latest figures from the National Association of Estate Agents (NAEA), there are fewer prospective purchasers around than at the market peak of 2006/2007. But the total absence of enquiries for property is a well worn media myth with the NAEA reporting that each of its members typically has 270 buyers registered at any one time. There are 10,000 estate agency branches in the UK and so that’s approximately 300,000 people that have declared their intention to buy and that’s without the 14.5 million people that visit the combined five largest property websites of Rightmove, Zoopla, FindaProperty, Prime Location and Globrix each month (Com Res). To put that into perspective, that’s around one third of the adult population of the British Isles visiting property portals each month. Demand? You bet…
And what of restrictive mortgage lending? There’s definitely less money being thrown about by mortgage lenders. But is the mantra true as spouted by the media regularly ‘You simply can’t get a mortgage nowadays’?
ThisIsMoney, the financial website, says that there are now over 3000 mortgage products available compared to 1000 in 2009. The current level of availability compares favourably to the peak of 2008 and rates are now lower too.
So if there is a ready supply of properties and, in truth, a reasonable presence of buyers and mortgage funding, then what’s the problem? Why are transactions so low compared to the dizzy heights of the pre-banking crisis?
The answer is HONESTY.
Real property prices have dropped to around 15% below their highest levels of five years ago (Halifax). But asking prices are, typically, at exactly the same point that they were back then. This marks a sort of 15% ‘no mans land’ between the price that sellers want and the price that buyers are actually prepared to pay.
The difference with the property market now in comparison to previous downturns is that potential buyers are very well informed indeed. They are increasingly resourceful and, thanks to the Internet, have access to sold prices, local property market analysis, trends via the property portal sites and, of course, a stream of 24 hour news with pundits, commentators and experts dishing out opinion and statistics left, right and centre. They know their onions.
Sellers have to contend against this remarkable plethora of information. It’s quite natural for home owners to want the best price for their property and even to suffer mild delusion over the price that they think they can achieve. This optimism is regularly reinforced by estate agents that are either ill-informed or indeed that demonstrate old fashioned, traditional dishonesty when valuing potential clients’ homes.
The fact is that buyers decide the price that a property will sell for. The estate agent is merely a barometer, a mirror held up to the market itself. And so, if you’re hell bent on cashing in on a particular figure for your ‘much improved semi’ and this is backed up by a chap in a sign written Mini that tells you what you want to hear, then you can’t be blamed for digging your heels in.
But when, some months later, your pride and joy is getting a bit whiffy stuck on the estate agents’ shelf, you have to concede that your price (and his) may just be a bit out of synch with the market and what it is willing to pay.
Honesty and reality. They are two big obstacles to get over when it comes to pricing your house for sale.
If only every seller and every agent were just a little bit more of both then all would be well in property world once more. Simple.