2011 – What a year! Lot’s of up’s and down’s (and quite a few round and rounds!) From a purely objective viewpoint, it has been fascinating to watch the economic and political manoeuvrings; some of which will have a significant effect on our futures.
From a property perspective, the year began at a reassuring pace. The steady flow of new property listings to the open market, resulted in a healthy number of completed sales. This created an air of hope amongst the buying and selling public that we may have a chance of avoiding the dreaded double dip!
However, any such confidence was soon eroded by the banks continued approach towards a strict lending policy. Many willing buyers presented themselves before the lenders, only to be turned away. The need for a large deposit and a squeaky clean credit rating were the most common hurdles. It seemed the banks intentions were to clean up their client base by eliminating any ‘high risk’ individuals from their portfolios – the complete opposite of their approach only a few years ago! Their approach recorded record low levels of mortgage approvals.
With a lack of real buyers with the funds to purchase and a lack of urgency amongst vendors to sell, the middle half of the year saw the number of homes for sale start to rise. The extraordinarily low interest rates created a comfort zone in which there was simply no financial pressure to sell. Vendors decided to wait it out and hope things would improve. Unfortunately though, buyer’s confidence was starting to falter. The cost of living continued to rise, as did the feeling of uncertainty surrounding job security. With no obvious strategy in place to curb inflation, the public recognised they were getting poorer. With buyers and sellers adopting a ‘lets wait and see attitude’, the second half of the year began with a slowdown in activity.
Then came the euro meltdown! The immediate effect was the rapid erosion of confidence within the housing market. With the media reporting an Armageddon type economic reaction, genuine buyers had every reason to bide their time. The final quarter of 2011 saw vendors starting to rethink their strategy and become more flexible in their negotiations.
As the austerity measures, cost of living and ultimately interest rates rise, ‘real’ disposable income will dwindle. This will bring an increased financial pressure for vendors and thus more reason to sell. If this is the case, more homes are likely to be listed to the market, bringing more choice for buyers and ultimately downward pressure on house prices. According to Rightmove, November saw the largest drop in asking prices in the UK since 2007; an indication that the smart sellers are already making moves to get ahead of such a situation. I do feel those who adopt a more proactive approach may well escape further market drops.
There is always a great deal of stress and pressure involved with buying and selling a house; it is after all most people’s largest asset or financial burden. However, it is important to keep things in perspective. Shifts in property prices usually affect us all simultaneously and therefore it is usually a ‘relative’ experience. At present those in most position to lose are those downsizing or those who are significantly overburdened with debt against their home. Even then, I would advise against falling into the ‘we will wait until the market turns around next year’ attitude – because it highly unlikely! In reality, I can’t see any significant rises before 2016.
On the positive side, it has been reported that mortgage approvals were up in November, It seems a tweak to asking prices has enticed buyers back in. With the rental market booming, the average monthly rental figure has risen dramatically, putting pressure on disposable incomes. Prospective purchasers may start to view buying as a more affordable option. The desire to buy is certainly mounting. I would suggest downward nudge in asking price may be enough to release the pent up desire to buy and ultimately enable a sale.
My advice to vendors is simple – if you are struggling to sell, a tweak to your asking price will realign you more competitively within this crowded market and allow you the opportunity to sell before the market toughens in 2012. Reducing your price after the market has dropped will simply align your property back where you started!
