Press Article
THE SUNDAY TIMES - February 21, 2010
Playing a waiting game
The big question: stay put or sell up? With the outlook across the United Kingdom still gloomy, it’s a tough one to call
By Jessie Hewitson
Just when you’d begun to relax about the state of the property market, it seems things are going pear-shaped again. Repossessions are rising, the rate of sales falling through between exchange and completion is now alarmingly high — thanks, in part, to conservative lending policies by the banks — and the prospect of a second recession is once more a hot topic of conversation.
Despite a recent rally in prices in London and the southeast, Nationwide, the country’s largest building society, said last week that house prices could remain flat or fall in 2011 and 2012, increasing fears of a “double dip” in the market. Comments from Capital Economics added to the gloom: it stated that the prospect of a fresh mortgage credit squeeze later this year hardly inspires confidence in the durability of any recovery.
“Royal Institution of Chartered Surveyors figures indicate that, even though both new stock and inquiries fell in January, for the first time there was an excess of new stock over new demand,” says Lucian Cook, director of residential research at Savills estate agency. “This suggests that there is the real prospect of a secondary but shallower dip in prices.
“That said,” he adds, “economic fragility and the uncertainty that surrounds the general election are likely to temper demand, which could present an opportunity for the buyer who is prepared to step into the breach.”
Some househunters already have a strategy. Tim and Amy Mitford-Slade, 33 and 32 respectively, want to take advantage of the seller’s market for family homes (they have accepted an offer of £500,000 on their five-bedroom house in Ashford, Kent), then rent for 12-18 months while supply is low, taking their time to find the perfect property: something larger, with land, in a prettier, more rural Kent location. They want their next home to be their 20-year one, where their children, Jago, 5, Lottie, 3, and Emmy, 1, will grow up.
“We started looking at the beginning of last year, but everything was going to sealed bids, or way over the asking price,” says Tim, a development surveyor. “Our plan is to buy a home for about £850,000 and renovate it while we’re still installed somewhere comfortable.”
What should you do? Not all of us will be affected in the same way over the next 12 months. It depends on whether you are a first-time buyer, a first-time family, upsizing, downsizing or planning to take the plunge and build your own home.
First-time buyers
The best strategy is to stay put, save like mad for the biggest deposit possible to secure a decent mortgage, then buy later in the year, when prices will likely be lower, according to Tim Hammond, chief executive of Buyers Edge, a property-finding agency that takes on first-timers with modest budgets.
“We’ve seen a false rise in prices recently, which is purely down to lack of stock,” he says. “If you wait six months, you won’t miss out — supply will increase, which will result in a flattening in house prices from Easter onwards.”
Even then, he advises caution: “Don’t jump at the first property you see. If there is a good opportunity to buy, go for it, but don’t rush into anything.”
Those struggling to save a large lump sum should consider assisted housing schemes such as shared ownership. “Banks are now offering 90% loan-to-value mortgages for property bought this way, and the deposit on a 25% share is minimal,” says Mark Vaughan, director of home ownership for Notting Hill Housing (nottinghillhousing.org.uk). He adds that viewing slots for the developments his organisation is selling are booked up weeks in advance.
In the north, buyers may be in a better position to negotiate harder because there is more stock, suggests Miles Shipside, commercial director for the property website Rightmove.co.uk: “If there are a lot of ‘For sale’ boards up in the area you’re looking, you know you can bargain hard.”
First-time families
Typically comprising a young couple, with a baby or toddler and a second child on the way, who desperately need more space, this category is fiercely competitive — everyone in it wants the same thing. And with kids involved, selling up and moving into rented accommodation holds less appeal.
Couples in this position should take a more counterintuitive approach. “Start searching for a new property before you put yours up for sale,” advises Jo Eccles, director of the buying agency Sourcing Property. “If you’ve got a decent home, chances are it will be snapped up. You need to be organised before you put it up for sale — decide on your area, go to a few viewings, get your finances in place.”
That said, this group is less likely to play the market. “If young families think prices will dip slightly in June, but they find the perfect home in March, most will buy in March,” she says. And, as Eccles points out, while house prices may be lower in six months’ time, mortgage finance might well be more expensive.
Upsizers
The question of finance is crucial for anyone aiming to buy big — it is better to move up the ladder in the downturn — but the bank may not oblige. An increasing number of deals are falling through between exchange and completion for this reason.
David Smith, senior partner at Carter Jonas estate agency, believes upsizers shouldn’t waste time in getting that “For sale” board planted outside their home, but must be prepared to rent out through market downturn, like the Mitford-Slades. “I’d get my home up for sale pronto, while there isn’t much stock, rent for six months, then find something to buy later in the year, when there will be more to choose from and prices might be lower,” he says.
A word to the wise, though: lots of families are considering this option, so there may be stiff competition for rental property, too. Rightmove’s Miles Shipside believes spring will be the best time to make the move: “Come Easter, we’ll see the right balance of a busy time of year for sales and more supply, and it will be before the market starts to slow down because of the general election.”
People living in regions blighted by a slower rate of recovery — the north, the East Midlands and Wales, predicted to see higher repossessions and job losses — might do best to get their main asset sold sharpish.
“If there is a downturn later this year, it’s likely to hit the north harder, so best to move quickly,” Shipside says.
Chris Charlton, head of the northern region for Savills, takes a more relaxed view: “Most are predicting a return to growth next year, so in the case of upsizers who will be at their next property for a while, they can afford to lose 2%-5%.”
Downsizers
Those moving from desirable properties — such as a family home in a good location — down the ladder to, say, a flat should stay put until the end of next year, according to Ed Mead, director of Douglas & Gordon estate agency’s Chelsea office. His reasoning? “I have a suspicion that what is happening at the moment will continue for the rest of 2010. So, if you have a desirable property, it will continue to edge up in value, but anything less than desirable will struggle to sell.”
On the other hand, now is the best time to sell your big home, because of the stock shortage, so you should go for it — renting for the rest of the year if need be.
“If you think too much, and worry about where you are going to move to, you may miss the boat,” says Simon Backhouse, partner at the Canterbury office of Strutt & Parker estate agency.
He has noticed a trend among downsizing clients to buy a London pied-à-terre for weekends and for children to use, rent a primary home in Canterbury and buy a holiday home in France. “These clients are done with maintaining their home,” he adds. “They have more important things to worry about — like holidays.”
Grand designers
Nicholas and Nicola Paddy spent 18 months building their light, spacious house in Newdigate, Surrey, from scratch. It was their second grand design in 10 years. Having monitored the market for six months, they have decided to put the five-bedroom house on the market for £2m (through Jackson Stops & Staff; 01306 887560, jackson-stops.co.uk) and buy another plot in the county.
“House prices have started to go up in the area, and we’ve noticed a significant rise in new stock coming on, where previously there was no movement,” says Nicholas, 38, who runs a car-export company. He says that as soon as something that suits them comes up, they will buy: “It’s best to get at it quickly.”
As well as ringing around agents every week pushing for bargains, self-builders and renovators should also scour auction houses. A 10-bedroom former merchant’s house in Lincolnshire, for example, is going under the hammer on Tuesday, with a guide price of £180,000 (through Auction House; 01427 616436, auctionhouse.uk.net).
If you’re an anxious first-time grand designer, it may be better to wait until the second half of the year, when mortgage availability and stock levels should ease, but be prepared to beat off competition from the big developers as well as fellow self-builders.
Mark Jamieson, of Strutt & Parker’s southwest office, has this advice: “If you’re building a new house, don’t put in fittings that will be out of date by the time you feel you can sell it.”