No Crystal Ball Needed - The Context of Today’s Market

Having watched the recent BBC Panorama programme on the UK’s Housing Market it was disappointing to see an experienced estate agent within the industry claim he ‘doesn’t have a crystal ball’ when it came to giving advice and reassurance to a lady selling her family home after 25 years.

This type of language can fill clients with some dread and fear, and when they come to an estate agent for guidance, the estate agent has to at least give some indications over what to expect and what aspects might form an outcome – even if they don’t know exactly what that outcome will be.

Having worked in the industry for 18 years (Go View London starting in 2010), I have worked through many market cycles and there can be a lot of debate of what’s to come in the future, it’s a cyclical discussion.?

From 2016 to 2020 we were debating the future with a haphazard exit from the EU, then we were in the midst of something much graver with the covid pandemic and now we are seemingly at bursting point from years of low interest rates coupled with an economic stimulus package to cope with the financial ?effects of the aforementioned pandemic.

With a lot of conflicting advice out there at moment, I thought it would be useful to set out how we are seeing the market develop across sales and lettings.

Today’s demands

So how does today’s market correlate with previous years??Well, the first thing to consider is the societal changes and how the demands and needs of today’s buyer is different to buyers of yesteryear.?

There has been a mentality shift.?When I was growing up it was the case that most people married before 30.?After settling down they would take a 25-year mortgage that they would aim to pay off on retirement and lose the big outgoing from their life while they had reduced income.

Now there is a mindset shift, individuals are typically marrying later, phasing retirement later while stepping back from active, full-on employment and perhaps have a wish for a more ‘mobile’ and ‘flexible’ life.

When it comes to settling down, people still do of course, but it tends to happen a little later in life than it did before.?Not saying either option is right or wrong of course, but it does have an impact on their property ladder trajectory.

Rental Prices are up – House Prices staying stable

Rents are under enormous upwardly pressure.?Landlords have departed the market through increased taxation, finance and regulatory pressures on them and this has left less housing options for tenants with the remaining landlords seeing instant bidding wars for properties that previously would take weeks to find their value.

However, you cannot explain the rising rents just on less private landlords.?Ultimately, while landlords have left the market it is not corresponding to an increase of vacant properties that are neither owned by a landlord or by an owner-occupier.?In summary, there is no ‘excess’ stock – every property is feasibly filled with the exception of holiday lets. ??

From a sales perspective, prices in the Borough are up around 20% on pre-pandemic price levels. Institutional estate agents and some banks forecast price decreases of around 10-20% when the covid pandemic was in its unfortunate infancy.?Given this, these institutions are, in some cases, wrong by about a 40% swing in what has happened in the West London market, an enormous miscalculation.

Why could this be the case?

The volume of new build property simply has not met the demand for housing.?The national net migration figures, according to Office of National Statistics (ONS), were 504,000 for year end to June 22, and 173,000 to June 21.?

This 677,000 increase in population corresponded with ONS figures that new build housing completions for the year ending to June 2022 was 173,530?and 181,900 to June 2021 (the highest year on record).?Worth noting too, is that there is a well-publicised argument going on within government over scrapping the 300,000 annual new home target.

So, in summary we have 677,000 net migration over the last two years, divorce rates changing one property demand into two, upwardly mobile young people, an ageing population staying longer in their homes and these demands are matched with a new build supply of 355,430 over two years.?

Ultimately, this pressure has increased rental prices dramatically across the country especially near economic hubs such as London.?As a consequence, the housing stock that represents an alternative to renting (shared ownership and first-time buyer type apartments) have also increased in value - given the economic case for renting over buying has not been met with rents greatly pushing above comparable mortgage repayments.

Up the housing ladder, people look at the affordability of the new mortgages in the market and consider that this may have an impact on the value on family houses - forgetting that buyers are now looking more at interest only mortgages, or taking a portion of their loan as ‘repayment’ and the rest ‘interest only’.

Their reasoning is that in 35 years’ time, their house will be worth a lot more than the mortgage outstanding.?Indeed, when you look at inheritance tax implications it doesn’t necessarily make sense to a lot of people I consult with to pay off a mortgage completely at the expense of having disposable income to enjoy family life.

You then look at the needs and wants of today’s first-time buyer or professional tenant.?I read a piece recently on a buyer who was concerned over interest rate rises on his portion of a shared ownership apartment that he had purchased near central London.?He openly admitted, that while from an economic viewpoint he felt he should have purchased a full ownership property out of the central area, he wanted the ’lifestyle’ that went with it.

Ultimately, the two examples correlate to the same thing, buyers today consider the ‘lifestyle’ aspect of property ownership more than, perhaps, a previous generation’s more deep-rooted ideology of paying off the mortgage for retirement.

What could happen?

The only time there was a marked decrease in localised West London pricing was in 2009 when prices suffered at the end of the credit crunch.?It is possible that the main shock of Liz Truss’s ‘Mini budget’ has already been felt in the market and the pricing of property will continue to move up, albeit not at the significant percentage increases we have been experiencing.?

Take family homes in West London, there is only ever a limited number at any one time available to buy.?However, once bought, occupants tend to stay in those properties for a multiple span of years – is there ever going to be an influx of them on the market??My view is no - given if a developer purchases a parcel of land they are going to build the most economically attractive proposition – in each and every case this is high apartment buildings and it doesn’t take a genius to work out why that is the case.

So, in summary, between all the scaremongering that is happening, properties in West London and other suburbs in London remain much more in demand than the supply coming onto the market.?

Given this, and as what has been consistent in my 18 years in the market - the sooner you get on the market, the better you are down the road when it comes to selling, realising equity and making your next move.?

This is just my opinion of course; everyone has their own and certainly speak to a mortgage advisor to understand the options that are best for you.?

Moving in 2023 – get the right advice for you

My key message is not to panic, there are always options available whether you want the central crash pad (and have the means to pay for it!) or looking to achieve the best price possible for your family home – the team and I would be delighted to discuss the best way forward for you.

If you would like a valuation of your home, and updates on sold property in the area that act as a comparable guide on value – please get in touch and request a valuation.?Even if not thinking of selling in the near future, the team and I would be delighted to give some reassurance and help future planning.

For sales valuations: 020 8992 0333, option 1, or [email protected].

For lettings valuations: 020 8992 0333, option 2, or?[email protected].