Signs of spring: is the market recovering?
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There might not be gazumping galore, but bidding wars are a promising sign that the north London property market is moving once more. Just make sure to price correctly, advise agents
Spring is in the air, the blossom is out and the clocks have sprung forward. Along with green shoots of grass, the property market is beginning to show signs of recovery.
Don’t get too excited; we’re talking about the tentative buds of multiple buyers bidding on properties rather than a full blown gazumping epidemic, but there are hints that the north London property market might be beginning to get back on track.
Not so bullet proof
To briefly recap, 2016 did not cover itself in glory where property was concerned. The rush to get transactions through before the changes to stamp duty on April 1 created a spike that was followed by a fall off in sales that was further compounded by the referendum result.
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The big freeze came as a bit of a shock to a market that has traditionally been seen as a safe bet for homeowners hoping to turn a big profit.
“Historically most of the pretty affluent residential areas we cover in north west London have always thought they were bullet proof,” explains Mark Pollack, director of Aston Chase.
With buyers put off by the hike in stamp duty and land tax (SDLT) and vendors unwilling to sell for less than they hoped, we came to a property impasse.
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“It was so difficult to get anyone to do anything for most of last year. There was no urgency, no sense that people were going to miss out because nothing was going on,” he says.
On the move
With the change of season things have begun to thaw a little.
“We have definitely noticed a spring in the step of the market. There’s been an unexpected but very welcome upturn in good, serious enquiries – and transactions,” says Pollack.
The reboot is down to a combination of factors. The weakened pound means dollar based buyers with an eye for a bargain are looking for deals.
Vendors who need to sell for personal reasons, such as divorce or a death in the family can’t afford to wait, and there’s pent up demand from buyers who need to move and who are beginning to accept SDLT as a necessary evil (most of the time).
“The SDLT issue is still there but people have to forgo that if they’re looking to move into a long term home. They’re going to have to make that purchase regardless,” says Codi Aboody, associate director and sales manager at Goldschmidt and Howland’s Temple Fortune office.
That doesn’t mean that everyone has completely come around to the idea, mind.
“There’s still obviously a massive resistance to SDLT from buyers, particularly at the higher end, and of course most of those buyers are expecting to take it off the price,” explains James Morton, director of Benham and Reeves.
With no movement on the tax in the Spring Budget, vendors have to begrudgingly budge on asking prices in order to attract buyers.
“Prices have softened to reflect the SDLT and people who see value in what they’re buying are now ready to dip their toe in the water again,” says Pollack.
The price is right
We predicted that we were entering a buyers market back in September of last year, and this power dynamic is still very much in effect.
“It’s all about the price at the moment. There’s actually a decent market out there, but those buyers need to feel they’re paying the right price,” says Morton.
Ask for too much, and you’ll get the wrong set of buyers viewing your property. Someone looking for property in the £3 million to £3.5 million isn’t likely to be impressed with a £3 million property that should be on the market for closer to £2.5 million.
The problem for agents is managing vendor expectations. It’s easy to be tempted to go with the agent who gives you the highest asking price, but this can be false economy.
“Some agents, I’m sorry to say, literally have a policy where, to help secure a listing, they will tell a vendor what they want they want to hear, hang on to it for a period of time, then bring the price down and sell it,” warns Pollack.
The continued low levels of new stock coming to the market means agents are in fierce competition for properties, and vendors have to be careful not to let the pound signs in their eyes blind them to the reality of the market.
If it sounds too good to be true, then it probably is. Sure, you could get lucky and achieve a premium, but price too high and you run the risk of watching your listing go stale.
“If a vendor is serious about moving in the market now they have to be realistic about pricing or it’s just going to sit on the market,” Aboody explains.
The omnipresence of property portals online means that it’s easier than ever for buyers to be well informed, particularly when it comes to finding out how long a certain property has been on the market.
“Sometimes people don’t like buying a house that has been on the market for a long time and being the only buyer,” says Aboody.
“Whereas if there’s other people bidding on it then it’s sought after, it gives them a better feeling.”
Call it herd mentality, but Londoners love to be seen where the action is. This is why the city suffersfrom a rash of eateries that refuse to be civilised and take advanced bookings. A queue out the door for your pop up shop hawking overpriced street food purloined from a tastier culture is the best PR you could wish for.
The same reverse psychology applies to putting your house on the market.
“Sometimes by getting the price right at the outset you can benefit from the excitement associated with a new listing coming to the market and perhaps achieve a bit of a premium, whereas if you overprice it and it becomes old news and a bit stale you can sometimes chase your tail down the market and end up actually getting less than you might have done,” suggests Pollack.
Multiple interested buyers can spur each other on to start a bidding against each other, which puts the ball somewhat back in the vendor’s court.
“The market in general is still pretty challenging, especially at the higher end, but if you get the right stock at the right price then there are more than one or two buyers for each property, which is good for the vendors,” says Aboody.
Agents aren’t seeing wild sums being offered, with most bids still pitched below the asking price. If they do go above it, it tends to be in the region of just £10,000 to £20,000 more.
“We’ve got a house on at the moment where there’s a £150,000 differential within three offers, so that’s showing confidence, says Aboody. “That is a house that’s been on the market for a while that is now being deemed good value.”
Although competition from other buyers might push up the price, Aboody says that buyers can be reassured that the interest means that, should they need or wish to sell in a couple of years, the property is a desirable one.
That’s good news too for would-be sellers who have watched their listings languish in estate agents windows for months on end. Nothing gets the buyers going like a good price reduction.
“We’ve had a couple of situations where people have been bidding against each other because the price has been reduced to such a level that it’s created a market,” says Morton. Once a property finds the right level, interest will follow.
Well judged price reductions can quickly bring about a competitor situation, as the following case studies from Aston Chase illustrate. A property on Chalcot Square in Primrose Hill initially instructed at £7.25 million had been on the market for months. After knocking £1 million off the house sold rapidly at the full asking price, which at £1,823 per sq ft is still a strong showing.
On Warwick Avenue in Little Venice a house originally valued at £7.95 million was reduced to £7.25 million, then £6.95 million. It then sold for £6.25 million at £1,520 per sq ft as the house needed some work done to it.
“We actually had a higher bid of £6.4 million at the time of sale,” says Pollack. “But our client had already gone a long way down the road with the original buyer but didn’t want to risk falling between two stalls.”
Don’t believe the hype
There have been a few isolated incidents of gazumping in central London reported in the press as heralding a return to full bombastic confidence, but Morton reckons the news should be taken with a pinch of salt.
“I think it’s a little bit of overhype by agents trying to make it sound like the market is doing better than it actually is,” he says. “We haven’t had a case of gazumping so far this year.”
The foiled gazumping in Little Venice suggests that the new, more measured market has bred a cautious and - dare we say - kinder atmosphere around transactions. The trials of 2016 have clearly proved a humbling experience.
“Unlike Gordon Gekko said, greed isn’t always good,” says Pollack.
“In the current challenging climate I would say that less can be more. Sensibly priced property is more likely to stimulate strong interest resulting in a strong price, rather than over-pitching something,” he adds.
“That would be sound advice.”