Monthly Market Review – September 2012

Surprisingly sedate

With the end of the summer holidays, children returning to school and a sense of normality returning to everyday life, many market commentators had predicted a brisk start to the autumn market, fuelled by latent demand from the summer.

However, for most regions across the UK the market has failed to meet expectations, with national house price indices unanimous in their findings last month in reporting falling prices; thus further compounding the recent trend of a weakening market.

For the third consecutive month Halifax reported a fall in prices of 0.4%. Nationwide also reported the same percentage fall in prices after reporting a shock rise in August. Data from Nationwide also reported that the London price trend remains positive with an annual increase of 2.1%, albeit that London is only one of three regions, out of the total thirteen, still showing annual house price growth.

Across our operating regions Garrington is being advised by sales agents that both new buyer and valuation enquiries fell in September, with potential sellers being deterred by the possibility of achieving a lower sale value. Data from Hometrack supports this trend showing new buyers registering with agents falling by 3.6% – as seen in the table below, the largest fall in the last 3 months.

Taxing times

In recent weeks there has been a lot of interest in the prime market for properties valued in excess of £2 million. During September the Land Registry released its latest data regarding transaction volumes, and to the surprise of many, this revealed a 78% year on year increase in the number of transactions in excess of the new Stamp Duty Land Tax threshold, where the new 7% (or 15% for “non-natural persons”) band becomes applicable.

Media interest in the story quickly served to politicise the data, suggesting increased stamp duty rates had failed in their objective. In Garrington’s experience this is not the case, and the market around the threshold remains exceptionally price sensitive, with extremely few transactions taking place within 20% of the threshold band. This has been to the benefit of purchasers in many cases, and Garrington has already successfully negotiated a number of transaction prices to below the new threshold; which in one instance saw a £500,000 reduction in the asking price.

However, in our experience, the majority of transactions supporting price data above £2 million come from the super prime end of the market which is less price sensitive due to the supply of ‘best of breed’ homes remaining constricted. At this end of the market buyers will pay premiums to secure a home, as evidenced recently by a Mayfair transaction Garrington are aware of, where two competing buyers drove the sale value 16% over the £18.5 million asking price.

Investors remain active

Despite quieter overall market conditions Garrington has remained busy over recent months serving clients needs, with investors noticeably remaining active in their pursuit for an attractive UK property investment.

Rising yields, increased rental demand, weakening competition from owner occupier buyers, and lower sale values have created a window of opportunity for experienced landlords to increase their portfolios. Research released in September by Paragon suggests that 16% of landlords surveyed are planning to acquire more properties, to increase their portfolios to an average of 13 properties.

The upper hand – but for how long?

For the time being, purchasers on many occasions continue to have the upper hand in the market and can obtain attractive sales terms in a slower market. However, we are likely to see this trend change if the supply of quality stock remains restricted in the coming months or indeed purchaser demand starts to increase. Initiatives such as the Bank of England’s Funding for Lending scheme are likely to help kick start the market and, as seen from the table below, research from Nationwide illustrates how the house price to earnings ratio has continued to improve to levels not seen for nearly a decade.

The RICS reported last month that their members expect market conditions to improve in the run up to the end of the year.

In the meantime, market volatility is creating uncertainty and opportunity, and Garrington continues to carefully guide clients when navigating the market, to ensure any purchase is a logical one and offers good value.

Ph: +44 (0)20 7099 2773 Fax: +44 (0)20 7099 2779.

This report is for general informative purposes only. Whilst every effort has been made to ensure its accuracy, Garrington Property Finders Ltd accepts no liability for any loss or damage, of whatsoever nature, arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Garrington Property Finders Ltd.

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