Green Shoots?

Written by Peter Rollings

Friday, 13 February 2009

London_property_Market_green_shoots_market_commentIt appears to me that whenever anybody inside the property industry dares to suggest that the property market may be showing some signs of life, a faint pulse perhaps, those outside the property industry scoff at the very suggestion that this downturn will ever end, almost wallowing in their utter conviction that it never will.

Well, I am daring to tell you there are definitely some signs that the property market is starting to stir. They are faint signs at present but in my view, and I’ve worked through two property recessions, they are the first inklings that the market is very close to or has even reached the bottom in London.

I am told, by those that should know, that the economy in general has at least two more quarters of negative growth. This being the case, it doesn’t surprise me at all that the property market is ahead of the game—it always has been in the past and I vividly remember in 1992 being rushed off my feet and yet still reading doom and gloom in the press (the opposite was true when we went into recession in 1989).

Here are a few facts:

•    In London, we registered over 1,000 new buyers in January, the vast majority with substantial deposits (20%+)
•    A further 459 have registered so far in February
•    We have seen nine ‘best and final’ offer situations so far this year. The latest (yesterday) saw a flat in Holland Park being shown to 35 prospective buyers, three asking price offers and an agreed bid in excess of the asking price. (The asking price was 12% more than a figure that was unachievable last year with another agent)
•    Prices in most areas have already fallen 25- 30% and in many cases are back to their 2004 levels
•    We have agreed double the amount of sales so far in 2009 than we did in the corresponding period in 2008
•    There are a substantial amount of overseas buyers in the market at present. So far this year we have agreed sales to the following nationalities: Italian, French, German, Japanese, Turkish, South Africa, Greek, Australian, Chinese, Spanish, Russian, Thai, Irish, Danish and even two from Mauritius!

What I am not suggesting is that prices are just about to take off once again, nobody in their right mind would want that and furthermore the economic conditions are not there. What I am suggesting however that it is an extraordinary time, probably a once in a generation opportunity to trade up to a larger property, trade down and buy a cottage in the country or perhaps most importantly buy a rental investment with any money you have sitting in a bank which is doing virtually nothing for you.

It is worth noting that, on average, since 1945, property prices have appreciated by 174% on average in any 10 year period. Obviously I don’t know for absolute certain that we have reached the bottom however what I do know is that in, two years London property prices will be higher than they are now and in five years they will be substantially higher.

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written by alex, February 17, 2009
we just seem to live in different worlds... I know that you are a real estate agent and that you are incentivised to increase the number of transactions in order to survive in the current environment but what you are saying is just a LIE. You cannot just ignore what is going on in UK economy. This is just the beginning of the crisis... UK entered the crisis 1 year after the US, and as far as I m aware US price houses are still going down. So be sure that UK prices and especially London prices will go down further. Real estate experts (and not real estate agents whose view is totally biased) are seeing further decline... If you think that london prices will go up because overseas people will still come to London, just face it - London is not anymore the attractive city it was a few years ago... Just look at the city crisis - all overseas guys (30% of city) are leaving London... I m amazed how you live in a bubble...
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written by Peter Rollings, February 18, 2009
Thanks for taking the time to provide your comments, I am pleased that someone from the US is picking up our blogs and delighted to have the feedback. Firstly, I want to distinguish between two factors that I think are getting confused. I haven’t at any point said that house prices are increasing (although, Halifax would argue that house prices are actually going up http://www.thisismoney.co.uk/m...page_id=57), what I am saying is that there is more activity in the market and in my view they have reached a level at which buyers are once again starting to buy. As estate agents, we look at our market trends regularly and I think we are qualified to make this statement. We, along with other London based agents, and the RICS (http://www.rics.org/Newsroom/E...170209.htm) are all seeing a change in buyer sentiment. The fact that house prices have gone down so substantially is what is making the market so appealing, not just for investors, but for first time buyers. The affordability for first time buyers is now at 2006 levels (see Nationwide stats – http://www.nationwide.co.uk/hpi/historical.htm) and that, coupled with a decline in interest rates is better news for those looking to get on the property ladder. We are not naïve; we know that properties priced incorrectly will not sell, but if sellers are realistic and agree, with the guidance from their agent, an appropriate selling price, then the property will sell, and quickly. This is happening now. Fact. It is also true that we have a large number of international buyers looking at our properties, who know, that whilst the pound is weak, they are able to get almost twice as much for their money than they could a little over a year ago (particularly those buying with Euros and dollar denominated currencies). We have seen a dramatic increase in foreign buyers looking on our website, which we have been tracking since the middle of 2007 and from looking at the demographics of our buyers; we know that there has been an increase in those foreign nationals who are actually investing. London remains one of perhaps four 'World' cities where people aspire to own a property and this is NOT just driven by the financial markets. Incidentally, where did you get the statistic that “30% of overseas guys” are leaving London, I would love to know more about that? Thanks again for your response; it is always interesting to know how the London property market is being perceived abroad. Peter

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