This is probably one of my favourite times of the year. It’s not anything to do with Christmas Cheer and Happy New Year, but – and I agree this is a bit sad – I love reading all the forecasts and know from doing so over the last 20 years how much improved they are from when I first started in the industry.
The understanding we have of what I’ve dubbed ‘PPE’ (property, politics and economics) are now clearly three indicators of what impacts on the property market. And although still tricky to predict, we have so much more detailed data (20+ years) to work from so it is possible to glean a glimpse into a far more robust crystal ball than we have in the past.
CONFIDENCE AND CHANGE
The one thing that is still difficult to predict is buyer/seller confidence. To me, this still influences much of the market’s movements up and down and the smallest thing can spook people – even a tiny rise in interest rates, which have not moved upwards for over 10 years. In the past, we saw up to eight rises and falls in a year so we were used to the change. However, a small change today, much talk of price crashes, Brexit uncertainty and a bit of general doom and gloom in the air, could well put people off making property decisions over the winter period.
This is the first time everyone will have to work hard to secure targets. Just hoping people will ‘come through the door’ as they always have won’t cut it. Kate Faulkner
Add to this the fact that the market has changed so much – more than 50 per cent of homeowners now own their property outright, with no mortgage. Of those with a mortgage, most are on fixed rate so are insulated from rate rises for a while.
In addition, first-time buyers are being properly assessed for mortgage affordability, so are not borrowing silly amounts of money.
It’s these changes that we are seeing at work in our most robust of markets: London. In the past, average annual price rises of 7-10 per cent since 2000 were normal, now the Savills forecast is one year’s growth taking five years to achieve. That’s astonishing. Knight Frank and Chestertons are more positive for the next five years, while Countrywide see prices in London still growing versus Savills’ prediction of small falls.
The most robust growth figures seem to be for the North, which makes a pleasant change, but I’m not so sure that any of the ‘average growth figures’ will be that useful to people buying, selling, investing or renting in their local area. All over the country I present analysis of individual property markets and pretty much everywhere prices are going up, down and staying the same, depending on the demand and supply for individual properties.
From an industry – and to some extent economists’ – perspective, what is far more useful to understand our future market is the Savills’ forecast on demand and the breakdown of transactions by buyer demographics over the next five years.
Lenders in particular should take note and I think, together with the property industry, this is the first time everyone will have to work hard to secure targets. Just hoping people will ‘come through the door’ as they have in the past won’t cut it. Battening down the hatches and hoping the market will improve will not make it happen and could lead to such a lower rate of business that the industry contracts.
Fundamental changes to the way the property market will work should make the property system much more fair, with a more transparent, professional and respected sector.
Fundamental changes to the way the property market will work – from new build, to leasehold, buying and selling, possible loss of further revenue from commissions and of course the much-needed regulation – should produce a much fairer property system, a more transparent property market and hopefully a much more professional and respected sector. This will bring many challenges, over and above the usual market going up and down; personally I really hope it means the ‘good guys’ I often talk about will survive better into the future.
But I don’t believe these transactions will be achieved without a lot of hard work to secure buyers and sellers, advise investors properly – with independent financial advice a must in this sector – and of course, to help renters to get on the ladder to free up stock for the next generation of homemovers.
The property industry is working better together than I have ever seen it before but we have to get smarter and do so fast. For me, poor education of people at a local level of the reality of prices and rents in their area, the amount of deposit actually needed and the benefits of renting versus buying are as much at the heart of our often mentioned housing crisis as affordability itself.
It’s time the industry took control of communicating with local people and widening their role from sellers of property and letting to property advisers for the local authority about what people really need and can afford through to helping local people achieve a cost-effective roof over their heads.