Market Review 2004

Premier Property Search reports a watching and waiting game.

Since interest rates began to rise we all knew the Bank of England’s intentions and there has been some inevitability as to where the market would eventually head…certainly a slow down, probably a readjustment, possibly even a slump. It has taken a long succession of rises to persuade the public to keep their money in their wallets, only having some impact towards the end of the Summer, following Mr King’s statement to the CBI in Scotland in June and the latest rise to 4.75%.

This is still cheap money, relatively speaking, but over-lending by the Banks and Building Societies has resulted in many borrowers starting to feel the pinch. Nationally, according to media reports, repossessions are now up and new mortgages down. Caution has been the general watchword this year.

Mervyn King has been at the back of everybody‘s minds when purchasing property. Unless buying a rarity or taking a long term view, purchasers have stayed cautious, often leading to difficult and protracted deals. While extracting offers has often been like pulling teeth, many agents have had a very good year and the predicted slow down seen as pure hype. The later Summer months saw a distinct deceleration, however. Some blamed the seasonal blip, others a low point in the stock cycle, but there can be little doubt that it was the start of the long awaited slow down as confidence at last started to waver.

More recently, agents have been citing more difficulty in holding transactions together; chains are weakening and ‘gazundering’ is once again raising its ugly head. This is not to say that activity has ceased…far from it. There is still a lot of business being concluded, properties are being valued and
reasonable prices being achieved. One could say that vendors are trying to cash in on an extended peak to the market, and many are succeeding, but a change is certainly in the air and unrealistic expectations are not being met.

We at Premier Property Search are no economists, but being intimately involved in the market, we can clearly see what is in front of us. The lower end is re-correcting slightly, as is the middle market and compromised property at the top end. The best of breed in all sectors is tending to attract competition and, given the lack of supply of the best, it will continue to be underpinned. There is a great deal of money out there, sitting on account, waiting to buy property. There are plenty of movers from London who have been forced into rentals because of the deficiency in supply, ready to pounce. This is likely to underpin property values as long as the economy stays strong, demand is high and supply is weak.

2004 and beyond

For the vast majority of homeowners there will now be a watching game. The lower end and middle markets are driven by borrowing and are the sectors most likely to be affected by rates as they creep upwards. Activity traditionally slows down in the Winter months anyway, but this time around, the hatches will be well and truly battened down and a careful watch kept on just how far the Bank of England decides to push it. For the higher end of the market where cash buys property, it is sentiment that turns the tide and, while the new year bonuses are expected to be good, much depends on the
views of the analysts and dinner party chat.

The timing of any resurgence will, no doubt, revolve around the election. An early ballot, in say February, would be useful as by early Spring, we would have at least some indication of how things will pan out. A call for May however, would extend the wait and keep the agents’ phones relatively quiet, resulting in a late Spring Market. The general consensus among property professionals that we deal with is that we will see a 5-10% readjustment (which, after all, is where we were at the beginning of the year), followed by a general levelling out. Wishful thinking, perhaps, but for those who want to buy and sell property, rather than invest, a gentle rise is all that we can hope for and, as long as activity is reasonable, it should be a healthy place to be.

If you would like to find out more about how we can help you secure your perfect property Contact Us and we would be delighted to talk.