Let's not get too carried away...
Fri 19 Jun 2009
Whilst it is true to say that the market, as a whole, is in a completely different place to where it was six months ago, we mustnt forget that comparisons are made from a very low base (the horrific last quarter of 2008) and that the fundamentals, whilst improving, do not point to a booming market, but simply a gently recovering market. In my view, this is a healthy state of affairs and one that I expect to continue for the remainder of this year and possibly well into the next. The market has been through a torrid 18 months and all the indicators are pointing to the fact that the worst is behind us. London property was the first to go into recession (I think it started in August 2007) and, as in the last recession, is the first to emerge the other side.
The real issue which is dominating the market, and will probably continue to do so for a while, is the lack of property for sale. As a result, some distinct areas of the market, particularly the family house market of south west London has seen a surprisingly rapid recovery in prices. Our offices are seeing large numbers of buyers chasing an unusually low number of available properties. Prices have not, and will not for some time, reach levels seen in 2007, but many of our would-be sellers are surprised when we inform them what their house is worth and more importantly, amazed by the number of potential buyers who view and who are actually making bids. Obviously there are still those that mistakenly believe they can bid way below the asking price, but this is on the decline and interestingly, over the last 5 months the average gap between asking price and selling price has fallen from over 10% to just under 4%.
The lack of supply is fuelled by a belief from many homeowners, that if they are not going to get what their property was worth at the height of the market, they will stay put and wait for the market to improve. Others have seized the opportunity and have been successful in trading up and benefiting from the comparatively greater falls in value.
A word of caution; having had months of unrelenting negativity from almost everyone about almost everything, we must not get too carried away and fall into the trap of going too far the other way. I believe the future, for the next two to three years is one of steady recovery. My prediction in the medium term (4-6 years) due to a chronic lack of properties being built both in London and across the UK is for another boom which is as unwelcome to us in the property industry as it is to the general economy. The property market cannot be turned on and off like a tap and government needs to grasp this nettle now to prevent the next boom and bust cycle.