It's housing hysteria! Eight buyers chasing every home, prices up 50,000 a month...how the property market is reaching new levels of insanity?
Sat 22 Mar 2014
High demand for houses has meant bizarre tactics by agents. Tactics include 'open-houses' where 60 potential buyers view at a time. Housing prices have rocketed up to 50,000 a month. Buyers willing to overlook faults in order to buy a home successfully.
Stumbling around the room, the dim glow from a mobile phone barely illuminating his way, Chris Knott could hardly see his hand in front of his face let alone appreciate the finer points of the 250,000 flat. But with ten other prospective buyers queuing for the evening viewing, the estate agent was insistent that the 30-year-old project manager should not be put off by the fact that there was no electricity in the property. It was so dark I had no idea what colour the walls were or what the kitchen was like, said Mr Knott. There could have been a big hole in the wall and I wouldnt have been able to see. Despite this, as he went to leave, he overheard another house-hunter telling the agent he wanted to buy the property in East London. It was incredible, said Mr Knott. Even though he couldnt see what he was buying, he said he was willing to offerthe asking price there and then. In many ways it was a merciful release for Mr Knott.
In the past few months, he and his wife Isabelle, 27, have twice made offers on properties - only to have the rug pulled out from under their feet. In the first instance they were gazumped at the last minute. Having had an offer on a 235,000 flat formally accepted and having paid 500 for a valuation, they were rung up by their estate agent to be told the sale was off because someone else had trumped their offer by 10,000. On the second occasion a similar thing happened - although Mr Knott believes there wasnt another buyer and that the vendor was, in fact, simply just trying to lever up the price he would pay. The tactic has been nicknamed ghost gazumping - and is one of the most unpleasant features to have emerged from the property boom currently sweeping parts of Britain.
Unlike the gazumping of the Eighties, when rival buyers stepped in at the last minute with a higher offer, this trend involves sellers increasing the price themselves because they know their purchasers will be so desperate to close the sale that they will stump up the extra cash. Some have been asked to find as much as 100,000 just days before contracts were due to be exchanged. Its now very common and a depressing factor of a market with low supply and monster demand, said Peter Rollings, chief executive of Marsh & Parsons estate agents.
And it is not the only worrying aspect of the market. With eight buyers to every seller, prices rising by as much as 50,000 a month even at the lower end of themarket and sealed bids becoming the norm, in some parts of the country theres never been a more stressful time to purchase a property.
And, of course, estate agents are exploiting the demand. Forget being shown around a potential house at a time of your choosing - nowadays, if you want to buy, youll spend Saturdays queueing with up to 60 others to view on an open day. If you like it, youll have to put in a sealed bid by the Monday - without a second viewing. And dont forget to break the bank: asking prices are routinely being exceeded by tens of thousands of pounds. One 300,000 house in South-East London recently sold for 390,000.
While the hottest spots are in the capital, the boom is now being felt across the South-East and beyond. From Oxfordshire to Bristol and along the South Coast, open days, gazumping and ghost gazumping seem all that homeBuyers talk about. Take Winchester, for example, where prices have increased by 12 per cent in the past year. We do hold open days and they tend to go quite berserk, said Alex Lambourne, director of Belgarum Estate Agents Limited. Only last weekend we had an open day in a property: we had 23 viewings and eight offers. In the end, the property went to a sealed bid, so it was a success.
But for who? The fear is, of course, that this bubble will be short-lived, fuelled, as it is, by low interest rates and the Governments Help To Buy initiative, aimed at encouraging banks to lend to those with as little as a 5 per cent deposit. The Government either provides a loan of up to 20 per cent of the price, or gives the bank an indemnity on 20 per cent of the home loan. Add in mortgage companies loosening lending criteria and demanding smaller deposits and the fall-out could be catastrophic for those who have launched themselves on to the property ladder.
Im sure we are entering bubble territory, one estate agent told the Mail. Forget what any politician might say, every boom is followed by a bust. I have been in the business about 40 years and that is all that has ever happened. Its a bit worrying really. The bubble might not burst this year, but it will burst. Until then, the human misery caused will continue: families crammed in too-small houses, couples forced to put off having children, youngsters stuck in their parents homes.
The booming market is reflected in figures compiled by LSL Property Services which show a 38 per cent jump in the number of sales across England and Wales in the last quarter of 2013 compared with the year before. The largest percentage growth was recorded in the East Midlands at 42 per cent, followed by 40 per cent in the South-West. Interestingly, London recorded only the eighth largest growth in sales, at 36 per cent.
Prices rose nationally by an average 6 per cent last year. Areas such as the South-East, West Sussex, Bedfordshire, Brighton, Hampshire, Oxfordshire and Bristol recorded new average-house price records. Outside London, Poole saw the biggest annual price increase at 16.4 per cent (the average house increased by 45,000 on average) while in Bournemouth, 25,000 was added to the average house (12.4 per cent). Across the capital they went up by more than 11 per cent, nearly double the national trend.
The problem is lack of supply and strong demand. Nationwide, for every new instruction, there are eight buyers chasing it. In London that rises to 13. As a result, says Andrew Montlake of mortgage broker Coreco, competition has now reached fever pitch. Whats going on in London is crazy, he says. The shortage of property coupled with a large demand and the assistance from Government schemes is definitely leading to dangerous levels with regards to house prices. We always used to say that London is like a different country but it is almost like a different planet now. There are a number of reasons for this lack of supply. First, insufficient new properties are being built. Second, homeowners are reluctant to sell their properties because they know that they too will struggle to find somewhere to buy. Third, cash-rich foreign buyers have poured money into prime areas of central London, forcing a ripple effect outwards. As for demand, that has been increased by the very low interest rates which have seen the cost of mortgages fall dramatically.
There is also a lot of pent-up demand from buyers now feeling confident enough after the recession to take the plunge. Finally theres migration into London, where the population is growing twice as fast as in the rest of the country. It means that vendors very much hold the whip hand at the moment. Properties that wouldnt have sold even a year ago, thanks to problems like damp, are now being snapped up. Sellers dont even need to tidy up: viewings for a 285,000 flat in South Londonwere booked minutes after it went online last week, despite pictures showing a chaotic mess inside.
And where London leads, the rest of the country follows as Justine Wharton, 30, knows all too well. The civil servant and her boyfriend Samuel King, 32, who runs search engine optimisation companyseosamuel.com, started house-hunting last year. The couple have a 25,000 deposit and want to spend 250,000 on a small house in Romford, Essex. Weve been to a depressing number of viewings, said Miss Wharton. They always take place on a weekend and can involve dozens of other potential buyers. Ive been in houses that have so many people looking round that Ive ended up stuck on the landing unable to go forwards or backwards. The estate agents act like bouncers on the door of a nightclub letting one in and one out to prevent overcrowding. We have offered on five places, and had three offers accepted - we were gazumped on two of them. On one, the estate agent told us our offer had been accepted then rang up the next day to tell us someone had offered 10,000 more than our offer, which was already 10,000 over the asking price. Another vendor raged at them for asking question about damp. She was furious and told me: "We dont care whether you buy the house or not - weve got people knocking on the door asking to buy it. We dont care what you do." Getting a mortgage used to be the difficult bit, said Miss Wharton. Now its all a nightmare.
Jessica Herman, a 26-year-old social media account manager, agrees. She lives with her parents in Southgate, North London, and is trying to buy a one-bed flat with her boyfriend, who works for an oil exploration company. With help from their parents, theyve saved a 70,000 deposit and earlier this year had a 430,000 offer accepted on a 425,000 flat. But the estate agent continued to market the property. When we checked the website the next day, additional pictures of the property had been added, she says. We tried to ring but she was very evasive and it was clear she was stringing us along, hoping for a bigger offer. Sure enough, come 4pm, we got a call to say the vendor had changed her mind and wanted to go with a cash buyer.
All that mattered to the agent and the vendor was getting as much money as possible for it regardless of the original asking price. It was eventually sold for around 450,000. The couple have since attended 30 other viewings. Its been a hideous experience with estate agents behaving with the arrogance that comes with knowing they can call the shots. Weve felt under pressure to make offers on flats we didnt even like purely out of fear we would miss out - most of the flats sold within two or three days. We called one estate agent to view a property that was being marketed at 375,000 only for him to ask: "Can you go up to 450,000 because youre going to need to?" The couple are right at the upper end of their budget, and are terrified that if they buy a property which is too expensive they will find themselves unable to meet their mortgage repayments should interest rates - which are unusually low - rise again.
With the situation so extreme in London, buyers are now looking outside of the capital, putting pressure on the markets in the provinces. Oxfordshire estate agents report that nearly a quarter of their sales are now to Londoners. Mark Charter, of Carter Jonas, explains: As prices expand way beyond what can be afforded by local families earning their money locally, they are being pushed out a few more stops along the commuter lines every time and, eventually, that pushes them out to Oxfordshire. Away from their family, their friends and their jobs. All for the sake of a roof over their heads. For many, this emotional cost may be the most expensive one of all.