Has the bubble burst ?

 Discussing the market last week with my Stacks colleague Rachel Johnson she summed up the situation so eloquently that I give it here:-

“A blanket assumption that you can now haggle on price is erroneous.  The properties being discounted are those that had their vendor’s price expectations set around May, and were probably over-egged at the time.  For those that kept that pricing strategy but didn’t come on until Autumn, that’s where you’re having to take the big price-chips.

Realistically priced homes will not need to price-chip, as there are plenty of buyers that have not managed to find.  It is still your job as the buyer to present yourself as the best, most reliable buyer that the agent can wholeheartedly recommend as the one that will stick with it. Being chain-free or able to break a chain will still be the most prized characteristic in a buyer.

Not all vendors are equally motivated – you’re aiming to understand what is their driver for the move.  You can easily offend with a price-chip, and some vendors will cut their noses off to spite an insulting offer.  Getting things thrown in to the deal is always a more long-term strategy – arriving in a new community when you’ve been bad-mouthed by the popular family leaving won’t be as nice as being introduced at the vendor’s leaving party to your new neighbours – some things are worth more than a few ££.

We are already seeing more properties that are technically off-market – open to being bought but not visible on the portals. You won’t get a bargain with these, but you might get the right house…………..”

 

A new Prime Minister and promised stability bodes well for a market which was white hot here for most of last year and the first half of this year. Now common sense is setting in and supply is increasing. However demand for quality rural properties still exceeds supply although the frenzied feeding has abated. Despite a little more supply, correctly priced better properties are moving and more and more prime properties are being offered away from the portals. Underneath the surface of this interesting market we have been conducting more off market acquisitions than ever before. 

The pace of activity over the previous eighteen months has been a problem for the conveyancing system, which despite technical advances in every other sphere, remains chained to archaic practices and means that there can easily be three or four months between acceptance of an offer and exchange of contracts. Preparation of the purchase finance, a really good conveyancing solicitor and research of the target property by your buying agent are key to success as is understanding the substantial stamp duty savings from the mixed use and mixed title concessions on which we advise on regularly.

It is impossible to tell whether the rock and roll ride we have experienced will level out or crash out but what is certain is that the gap between London and the West Country is smaller now than for many years. We used to reckon that a two bedroom flat in Chelsea was the equivalent of an Old Rectory here. That equation has fluctuated over the years but at the moment you will only get 3/4s of an Old Rectory for your two bedroomed flat.

One of the reasons for this dramatic change is that Londoners who sought refuge here during Covid have realised that it really is possible to do an awful lot of work at a distance and consequently want to stay; some of them will be here for good. Whether there will be quality stock for them in what has been a tight market will be interesting to see. What is certainly true is that vendors experiencing a flat market in London are surprised to be confronted by the high expectations of agents and vendors here. This gap in expectations is making the market particularly tricky as so many local vendors of better properties are discretionary. 

One of my favourite country houses, near the Devon and Somerset border, was launched after Lockdown 1 and sold within days to a family with young children who are actually going to live here rather than weekend which is a huge bonus for us locals.

Despite political and financial turmoil, the essence of what I said in last Summer’s interview (below) remains true but if you would like a more detailed analysis, or a chat about a particular property or area, just give Nick or me a call.

Nick 07977 490574         Gideon 07966 425977

December 2022

 

A Q & A session with a regional journalist last year…….

Q) What factors affect the property market in the South West?

Owners of better properties here are mostly discretionary vendors. Discretionary vendors are motivated by sentiment as much as anything else and that sentiment turned positive in the Spring. Due to the much more certain outlook they are calling selling agents and requesting valuations after several years of sitting on their hands. They are however still very cautious and consequently many are offering their property on the grey market rather than via the portals.

These discretionary vendors do not have to move to get their child into the right school by the autumn, their children are grown up and they will sell only when they feel they have been offered fair value. Fair value to them is often coloured by agents giving fanciful valuations at a time when they are critically short of stock. A probable increase in stock together with a likely increase in demand is likely to unblock the current constipated state and make for a much more fluid market. However I don’t believe this will result in price increases as buyers will rightly remain cautious, that is unless the government really does press the spend button and the market goes into boom mode. 

Q) Are there particular regions/segments that stand out as particularly good performers?

The price contours of the West Country are quite complex and remind me of the Venn diagrams we did at school. Where a property falls within the three spheres of good communications, good schools and an agreeable landscape, values will be strongest. Fashion also plays an important part too; if you want value, avoid the spots that central Londoners holiday in. These ghettos also suffer worst during times of financial instability.

Q)  How will the delivering of Brexit affect South West property?

The London market is alive again boosted by increased confidence from native buyers and the safe haven it offers overseas buyers. This is allowing those who have been trapped by a lack of purchasers to reconsider their lifestyle moves and look further afield. In my opinion Stamp Duty is still much more of an issue than Brexit uncertainty has been and it is worth bearing in mind that many rural properties in this part of the world are eligible for mixed use stamp duty which can give dramatic savings. Many overseas buyers do not “get” the West Country in the same way that we do so their influence will always be vicarious by driving indigenous Londoners to the provinces. 

Q) The government has promised to boost infrastructure spending in the South West.

All my life the West Country has suffered from a lack of investment in infrastructure. When I first started driving I looked forward to the day when the A303 would be dualled all the way. It never happened and the M5 never got beyond Exeter despite various promises. We have a dual track train service to London on one of Brunel’s finest lines. The outdated rolling stock is only now being replaced with new carriages that not only are just as cramped as the old ones but the seats are even more uncomfortable; you cant even get a cup of tea because there is no buffet car! West Country people have overcome these irritations to establish an enviable quality of life and I think it is their ability to laugh at adversity that makes them special. 

Q) Were I someone looking to invest in the SW what are the pitfalls?

Always buy the best you can afford. That ruined Old Rectory the other side of Holsworthy may look extraordinarily cheap but there is usually a very good reason. I can think of two that have had indifferent but expensive refurbishments and cannot be sold at a sufficient figure to cover their costs.

Q) Were I looking to sell within the SW, what would be your advice?

The agent coming to pitch for your sale will often not be the one who starts the transaction. More likely this will be the young man or woman at the office who picks up the telephone. How this first enquiry is dealt with is crucial, do some mystery shopping yourself, pick a property similar to your own, call the selling agent and see how your enquiry is dealt with.

So chose an agent you can engage with who has efficient staff, not the one suggesting the highest selling price. They practically all have good websites now so there is little differentiation in their offer other than the quality of their staff and the size of their fees.

Q) Overall are you optimistic, or cautious about the short-medium term?

If you live long enough property is always a good bet but the public prefer their jam today rather than tomorrow. I do not believe property is ever a suitable short term investment as quite apart from the risk of catching a change in market sentiment, the costs of trading eat away at a large proportion of any possible gain. My advice is buy a property that you love and that will enhance the well-being of you and your family; your family is after all your most important investment. If you get some growth in value then think of that as a bonus.

Gideon Sumption

 

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