Historically low interest rates have helped to ensure that there have been relatively few distressed sales. Those lucky enough to have tracker mortgages could afford to hold on to their properties, or to rent them out and comfortably cover their payments. And so the price freefall, which many had predicted, did not occur. Unlike in the last recession, comparitively few homeowners had to hand their house keys back to the building society.
As the value of Stirling fell, investors with Euros or Dollars were soon snapping up property, especially in prime London locations. They were able to buy at a discount of up to 50 per cent compared to nine months earlier. The market’s pulse had started once again. Low rates and uncertainty over the stability of the banking system also led local investors to question whether holding large amounts of cash on deposit was prudent.
And, seeing prices dip to 25 per cent less than they had been, investors began to buy again. They may not have been banking on capital growth, but were opting for a five or six per cent rental yield compared with one or two per cent interest from the bank.
Throughout this time there were very few properties for sale. Competition and confidence began to grow. Parkheath registered double the number of buyers this spring, compared to last year; the agency also put 40 per cent more properties ‘under offer’ between April 09 and September 09 than in the previous six months.
Many who had been priced out of the market, now saw their chance to get on the property ladder. Those home owners wishing to upgrade began to enter the fray again, proportionally saving more on the homes they were buying, than had been lost on their current property.
The mechanics of the local market were once again beginning to move. And this ‘movement’ translated into very positive figures. Parkheath actually sold 60 per cent more homes between April 09 and September 09 than in the six month previous. And these homes were sold at a level closer to client expectations.
Sales in the three months to September 09 completed at an average of 96 per cent of asking prices, compared with just over 85 per cent of asking price in the same period six months earlier. This sentiment and increase in transactions has continued through the autumn. At the time of writing, Parkheath’s sales figures for quarter four have already surpassed those of quarter three – with six weeks left before year end!
The London bounce has surprised economists, and left buyers confused – with good reason. The national press continues to report falls in the ‘average’ house price and unemployment is still rising. Recent predictions have forecast a further 20 per cent fall in house prices before the bottom of the market. Not to mention the ever-present threat of the dreaded ‘double dip’ recession. But, in contrast, London buyers are finding a shortage of property on the market.
Good properties are being fought over and those close to exchange on deals agreed three months previously, are being threatened by new buyers with higher offers. This competition in the market has seen prices recover to levels similar to those seen at the high point of 2007.
But can it continue? What does next year hold? Barring any nasty surprises I anticipate that the recovery will continue. But, as those accidental landlords begin to sell, and the availability of mortgage finance continues to ease, the recent surge in prices should revert to sustainable growth.
This may be very different from the predictions for the national market, but highly desirable areas of London will always behave independently to the rest of the country. Despite this positive news, the market is difficult at best, fragile at worst. There is still stagnation, due to the lack of supply, but I do feel that the recovery we have seen so far is sustainable through 2010.
Have your say on this article using the comment section below.