I was privileged this week to be invited to be on the panel of ‘the Essential Debate’ ‘ Is the Property Crash over in Bristol’ hosted by Andrews estate agents. The Bristol Evening Post reported this afterwards as ‘City property market ‘is now poised for good times again’’ with ‘Experts in an upbeat mood…’. The first question to the panel was ‘Is it over?’ Whilst it was agreed that the worst may be over and the signs were encouraging, I doubt the panel would have gone so far as to endorse a suggestion that the ‘good times’ were about to role.
Media and public focus on the housing market is based on house prices. The real ‘crash’ was in terms of transactions rather then prices. House prices fell some 20% nationally, however the numbers of completed sales, fell off a cliff from a peak of some 2.5 million per annum to only some 500,000. The figures bottomed out in around December 2008, and have improved in 2009, but remain relatively low at about 600-700,000 per annum.
Prices rallied gradually in 2009. Michael Robson Group Chief Executive of Andrews advised that about half the reduction has been recovered and certain areas should soon to be offered at pre crash levels. Richard Sharpe MD of developers Urbis Development, indicted that developers are coming out of their enforced hibernation, and his contractors now have other jobs to go to when they leave working on his site.
Prior to the crash price increases were very much fuelled by demand outstripping the supply of property available. Agents have since the summer reported to us- as they did before the crash –a lack in stock to meet demand, which has again fuelled prices. There are of course local variations.
Andy Tilsley dubbed ‘the man with the cheque book’, from the Nationwide, was the voice of caution, pointing out that house affordability must be linked to wages, and an increase in house prices not met with a corresponding increase in income levels was unsustainable. Factor into this as well that the least expensive mortgage deals require the higher deposits, and access to the market remains difficult for the first time buyer. Caution was also was the watch word from Ned Cussen of King Sturge who pointed out that in sharp contrast, the commercial property market still faces real difficulties. Professional landlady Philippa Crowder advised also that there was no scope for rent increases.
Whilst there were positive signs, the start to 2010 has been very slow. Figures just published from the Nationwide indicate the sustained rally in prices over the past 10 months stalled for the first time this month. This may in part be due to the removal of the stamp duty holiday, and the dreadful weather. There are hurdles ahead. An election in prospect and the uncertainty this brings, the prospect of austerity measures after this, an only slight and therefore potential fragile recovery in the UK economy so far, and problems in the euro zone. Less publicised, there are also worries ahead for the availability of money supply to the lenders which could impact on the availability of credit once again next year. Lenders think there will be a ’bunkering down’ for the first part of this year , bringing out remortgage products to meet this, expecting the busier time to be at the end of 2010.
So, good times around the corner or not, is it a good time to buy ? Michael Robson’s opinion is that there have been five good times to buy, and this is one of them. In any market it is more by luck than judgement to pick the top or bottom of it, but if the only criteria is second guess house prices, the time before the crash when everyone thought it was a good time, certainly was not. I always like the quote from the great Warren Buffett ‘Be fearful when others are greedy and greedy when others are fearful’. Bristol certainly has always been a strong property centre with a relatively limited supply of housing stock and a fairly consistently strong demand from private buyer and buy to let market, so has probably ridden the storm better than most areas.
Whatever the market is doing, it is vital to follow the ‘rules’. The first second and probably only rule is: location location location:- always buy the best you can afford in the best location. Do your home work- i.e don’t buy a fab 3 bed house at the top of its price bracket, when for the same price you can get a slightly less fab 4 bed at the bottom of its price bracket. Do your maths- and don’t let your emotions get in the way. If you can’t afford it don’t buy it. Interest rates are historically low and have been for sometime- they can go up, and may well do so. Consider the impact of such an increase or sudden unexpected expenditure. In buy to let, consider the impact if you have an empty property for any period, or your tenants fails to pay. Do buy some thing that will sell or rent. In the good times most things sell eventually. In bad times the market is very selective and less desirable property in less desirable locations will be the first to drop, the most, in price and the last the sell.