Property Market Comment

The last two years have been extraordinary.  We now have a definite image of life either PRE or POST covid.  I believe that this will change as the pandemic is pushed aside for the more favourable term – endemic.  Masks are no longer the norm and we are all allowed to travel despite the union interruptions and the airport chaos.  The important point is we are allowed to do what we want, and we are seeing a return to normality.

The property market is following a similar path but there are a lot of variables that we all need to consider in this softening market.

A year ago, we were desperately short of stock and it drove prices to unprecedented levels.  Three out of four properties were sold without going to the open market and cash was king.  In fairness cash is usually king when it comes to being at the front of the queue but many people do not have the luxury of funds sitting in the bank waiting for the perfect property.

There was genuine concern this spring that the stock levels were not being replenished and the pufflings were not jumping.  However, in contrast to May 2021 when the market shut up shop as everyone took to the pubs and restaurants, this spring we have seen a genuine revival of the market.  The pufflings started to jump and agents were rushed off their feet with more instructions and market appraisals than they have seen since 2019.

As the properties started to appear we were hit with the negative elements of inflation caused by increased energy prices, supply issues post Brexit and Covid, and the war in Ukraine.  The inevitable follow-on to inflation is increased interest rates.

So it is important to consider the impacts on the market.  With increased stock levels and potential increased interest rates for your mortgage there is a fear that house prices will drop.  However, this doesn’t appear to be the case.   Seeing reductions across Rightmove is not the harbinger of a property crash.  Remember, last year with real shortages, we were in a seller’s market and prices were higher than ever – just like our fuel and energy.  With more availability it is likely that the prices will see an adjustment but I would not hold off for a big drop as potential interest rates in 2023 are going to more than off-set any 5-10% reduction that you may be hoping for. 

And don’t think the pool of buyers is drying up.  The bottle-neck may have eased but there are still plenty of willing buyers looking to move in 2022.  What we are seeing is a softening in the market where buyers do start to have a say.  Certain properties will still be sold for higher than asking price due to demand, but not all of them.  There is flexibility where before we simply had hard-nosed vendors and serious competition.

On the whole the market has come back to the buyer but if you are looking to buy then don’t hang about because the properties are not, and next year the level of affordability will change as interest rates go up.  We are currently at 1.25% but we could see 3% in 2023.

So you have to make that call – stick or twist?!

One year ago, we crept blinking out of the darkness of our first lockdown.  Never before had we experienced such uncertainty, even fear of the unknown.  Previous pandemics were a distant memory for those of the older generation, but nobody today remembers the Spanish flu. 

Fast forward twelve months and here we are, anticipating the end of lockdown 3.  On 17^th May we can stay with friends and family, go to the pub, eat out at a restaurant without having to pile on layer after layer to stay warm.

What has this meant to the housing market?  Last year everything was put on hold until lockdown was over and we were allowed out of our homes.  However, this year the market has remained open throughout the lockdown.  Not just open, but buoyant.

Make no mistake, it has not been easy.  The concerns many people have over permitting people into their homes, the obligatory masks, hand sanitisers, social distancing, they have all led to a wait and see mentality that has created a genuine shortage of stock. 

If you are a fan of David Attenborough you may recall the image of young puffins, or pufflings, about to launch from the cliffs to take their first flight.  The housing market felt something like that in March.  Potential vendors all looking to see who would make the leap and put their house on the market.  The buyers were circling, eagerly anticipating the phenomenon of new stock.

As properties started to come to market, we saw a wave of viewings and a vetting of potential buyers before they were permitted access.  Proceedable?  This became the keyword.  If you needed to sell you couldn’t buy. 

So why are we seeing this?  Simply there are not enough properties coming to market to satisfy the demand of buyers who have been waiting, in some cases for months, to find their next home.  Savills have 8 buyers for every property they advertise.  Other agents do not have time to photograph or advertise properties, they are selling that fast.  And then there is the dreaded Best and Final…

Best and Final is not new, but it was never common, until now.  Throughout April we saw a swathe of properties sold within a week of coming to market and many going for guide or over guide price with multiple offers leading to the inevitable decision by the vendor’s agent of the best and final.  For those who are familiar with the concept it creates a sense of dread.  For those who are not it is quite exciting the first time.  It is rather like ebay for the property market.  Get your bid in by a certain time and hope you are the winner.

Best and Final gives the vendor the opportunity to consider the best bids and to decide who is going to buy the property.  It is not the highest bid that wins but the best package presented by the buyer to the owner.  Proceedability, cash, flexibility, swift exchange – all considerations for your bid.

So where do we go from here?

Fortunately, the pufflings have started to take flight, property is coming onto the market and the buying frenzy has started to calm a little.  There are still plenty of buyers and houses are selling very VERY fast.  However, as we acclimatise to these market conditions, we appreciate the importance of being ready.

If you are considering waiting it out, then just consider market factors.  Do we believe prices will correct after the insanity of the market at the start of 2021?  No.  There is simply too much demand at present for there to be any change this year.  We have seen a 10% increase in house prices since the 1^st lockdown and it is possible that, in waiting, you may see the market get away from you.

Will there be a reverse at the end of this bull market?  Again, this is unlikely.  There is a wave of buyers moving to the country and indications are that the working from home and flexible working conditions is here to stay. 

The Stamp Duty holiday and the furlough scheme will end and there will be tough times ahead for many.  However, the economy is already beginning to rebuild.  Government support in businesses and investment, low interest rates allowing excellent mortgage rates, a flexible work scheme by many companies, and high demand with limited stock all lead to the conclusion that this is not a bubble that is going to burst but a strong market that is here to stay.

As we ease slowly out of lockdown we are filled with a sense of hope and expectation.  After weeks of unexpected and enforced restrictions on both our lives and our livelihoods we are now moving into the ‘relaxation phase’.  Those lockdown weeks have given many of us time to reflect.

For many, the fear of this insidious virus has now been replaced by other fears.  The potential economic impact of lockdown has been headline news for several weeks and must be at the front of everyone’s minds.  Arguments are strong on both sides.  However, this comment is not about science vs economy.

With the reopening of the housing market we have seen estate agents bursting into action with hopes that we can swiftly return to normal.  The time of reflection during lockdown, the restrictions on home, family, and business life has surely convinced many that this is the time to move.  While some agents have reported their best week in years following the unlocking of the housing market, others have not seen the same bounce back.

New Normal

Working from home has, for many, been a pipe dream. Approximately 5% of the country work from home.  The remainder have a regular daily commute, whether it be a few minutes’ walk, or two hours on the train.  The new normal is showing us that working from home can work.  This gives rise to the idea that living near the workplace is far less important than it was.  Perhaps the balcony can be upgraded to a terrace, the terrace to a garden, the garden to a place in the country.  Many if not all of us have had the opportunity to reflect on what is important.

Economic speculation

The financial markets have made a significant recovery since the beginning of the ‘drop’ in late February.  While we saw an initial drop of 35% in early March the recovery has been steady. Global reports from the ECB have certainly helped. Latterly the US Fed predictions have hindered.  Speculation is rife as to the timing of the expected recovery.  Will we see a U, a W, a V, or an L.  Perhaps even the upside-down square root – very confusing for many to understand let alone predict.  However, the housing market is a resilient beast. 

Housing Market

With reflection comes the time to decide. Is it a good time for me to buy?  Is the housing market going to drop? Having moved into the unlock phase it is impossible to predict what the housing market is going to do in the next few months.  General opinion believes that the housing market is not likely to suffer a significant fall although commercial property is a different prospect.  While it is feasible that market fluctuations may see a +/- 10% variance, this is likely to be area specific and short term.  Looking ahead to next year one expects to see a return to growth and price increases across the country.  As buyer confidence returns, we can expect a strong 2021.