The first quarter of 2020 was marked by real momentum which, for the first time in years, started from the top. Some of this was price-related: central to an increase of over 10% in our sales over £1 million in recent months, has been an acceptance of market realities by buyers and sellers alike.
Of course, those realities now include coronavirus. This has dramatically changed how we handle enquiries and show properties (videos, ‘Street View’ and suchlike can only go so far), to protect our staff and those we serve and comply with new laws. How seriously it will affect the market over the coming months is hard to see at present.
Main photo: Suffolk £2,500,000 guide (Ipswich)
A DECADE OF DIVERGENCE
Our analysis of Land Registry figures (see graph) shows a decade which, having started at a time when sales volumes were low, saw them fall further in its first two years. The number of sales taking place then varied increasingly from region to region, perhaps indicating local factors at play.
A closer look, though, reveals that the divergence coincided with slightly higher stamp duty rates for more expensive properties from 2012 and much higher rates from late 2014, when, alongside, the tax payable lower down the scale, was reduced. This suggests that, far from being caused by local factors, the differences arose because national stamp duty tax suppressed sales at upper levels, disproportionately affecting market activity in higher priced parts of the country.
As a result, fewer buyers moved out from the more expensive south-east, reducing the transfer of wealth to other areas. The ‘ripple effect’ – an established stabilising mechanism of our national property market – was inhibited. This is one of the reasons why values in some regions have barely recovered to their 2008 peak whilst the South East, even excluding London, is 38% up. It is also why higher activity there, is good news for sellers everywhere.
SERIOUS SELLERS ARE SERIOUS BUYERS
The majority of house movers in the middle and upper levels have to sell, to buy. Yet no one wants to be involved in a chain. This gives unencumbered buyers a clear advantage, with buyers whose own sale is ready to exchange, a close second. In markets starved of stock, buyers understandably wait for the ‘right house’ to come up, before marketing their own. This almost never works, because better placed buyers beat you to it. When underlying supply is picking up (as it was), this increases confidence that the ‘right house’ will come up soon, which increases supply a little further... and so, rather like untying a tight knot, the market becomes a little, then much more fluid. Finding what you want should – if the market picks up where it left off – get easier. When you do, sellers will only take you seriously, if you are serious about your dependent sale.
PRICE, CLICK-THROUGHS & BEST OFFERS
In the last edition we emphasised how buyers today know their market values and will not even look at an over-priced house. Most of our sales are to buyers already registered with us, but online searches invariably start with location, price and picture. Your house appears in a beauty parade, complete with vital statistics. If it doesn’t compare well, you don’t get a second glance. This is why price and picture matter so much. It is also why deliberately pricing at the lower end, then going for best & final offers, is so often the best strategy. Generating lots of interest simultaneously, creates competition and thus the best price. We frequently adopt this tactic because it works so well.
HOLIDAY HOMES & FIRST TIME BUYERS
When the market resumes, we expect a revival in demand for seaside homes and others most suited for holiday use. Lowest-ever interest rates now mitigate much of the extra stamp duty and the trend for easy-access, UK holidays without air travel, persists. Occasionally, first time buyers compete with holiday home buyers, but location needs make this rare, whilst lower inflation and interest rates, zero stamp duty and Help to Buy have made buying for the first time more affordable now, than a decade ago, in all areas bar London† (where 40% Help to Buy applies). Welcome as renewed top end demand is, the market ultimately depends upon first time buyers, so this is good news for all.
Read our latest Market Review in full
