August 2007 - Marsh & Parsons gives a review of the summer market and predictions for Autumn 2007
Wed 01 Aug 2007
Despite August being a notoriously quiet month we have seen strong demand for property with a steady flow of buyers registering. As a result, we have seen like for like sales 16% higher than June/July 06.
Properties for sale have tended to stay on the market slightly longer than earlier in the year however this is to be expected given the speed of sale in the first months of 07. The post Easter market saw a return to normality, this was caused by spent bonuses, rising interest rates and fears over the American Sub-Prime market all contributing to a less confident environment. A lessening of buyer confidence was more noticeable at the sub 750k price range where buyers are more interest-rate sensitive however the market remains robust and our second quarter results are the best on record. Peter Rollings, Managing Director of Marsh & Parsons says "With such turbulence in other world markets perhaps the stability of the London property market is being viewed as a safe haven."
As expected, buyer enquiries have dipped slightly but well researched and astute buyers are taking full advantage of the summer period. We are finding that buyers are not feeling the same sense of urgency that was experienced earlier in the year with less pressure to commit to a purchase immediately and an increase in stock levels making them less likely to compromise. However, with sellers becoming realistic, prices are holding firm with sealed bids still common and high quality property still attracting substantial interest.
We have seen a high number of enquiries coming from overseas investors who are in London for the summer; particularly evident in Kensington & Chelsea. Chris Lloyd, Associate Director, based in the Chelsea office says "We have seen a substantial number of foreign investors and homeowners registering in our Chelsea office with up to 25% more than in the month of June". These buyers tend to come from a variety of locations but particularly Russia, the Middle East, India and perhaps more surprisingly, Italy. Lloyd continues "Most investors are cash buyers looking for lateral space with good security".
The summer is always a busy time for the lettings market and interest rate rises have certainly increased the pace of the market with many more tenants registering. As a result, rents have increased, in some cases substantially and yields are improving to a more solid 5%. Properties are being let within 48 hours with record prices being achieved. June and early July was particularly buoyant for families looking to secure a property before the summer holidays and August has been a busy month for sharers who are looking for properties with good transport links into the city.
The short let market has been steady and the level of corporate tenants is increasing. In July, Marsh & Parsons saw a 45% increase in Corporate revenue on the previous month and August is forecast to be even busier with ex-pats, graduates and foreign nationals alike flocking into London to begin new contracts ready for September. Emma Walker, Corporate Services Manager says "The competition between major firms has never been so strong and as they battle to attract new talent the offer of relocation assistance with increasing length of tenancies is evermore the norm."
The remainder of 2007 will see a return to a more normal' market with perhaps a 3-5% growth in prices for the remainder of the year. Demand still outstrips supply however the expected rise in interest rates later in the year will almost certainly stunt major growth in prices.