Every time I'm speaking at an event or invited to network with investors and the movers and shakers in the property world, people tend to ask me for my expert opinion on the market. The big theme at the moment amongst investors and buyers is the shocking lack of available stock - there is no shortage of ready willing and able buyers and tenants who are all queuing up (or scrambling over each other in some cases) to secure a bite of the cherry when properties come to the market. Most of my inner circle of investors are coming to me and saying "Alasdair, I just can't get a look in - by the time I've made an appointment to view it they've already sold it! What can I do?"
Sadly, it's the way agents work - but I think they're acting rashly. It makes more sense to let everyone view and then go to best and final bids - surely that'll win your client a higher offer, possibly in excess of the asking price when all is said and done?
Sadly, it's the way agents work - but I think they're acting rashly. It makes more sense to let everyone view and then go to best and final bids - surely that'll win your client a higher offer, possibly in excess of the asking price when all is said and done?
The issue is a complex one which can be tracked through various milestones going back over the past year or two - the stamp duty changes late in 2014, the Mortgage Market Review, jaw droppingly low interest rates, all against the backdrop of massive unrestrained foreign investment into the London property market forcing would-be buyers out to the provinces and thus raising the bar on prices and restricting entry to the market for first time buyers in their home towns. Interviewing local people in Harpenden and St Albans we found that many buyers feel they are being forced out due to a lack of available affordable housing stock and prices being driven by wealthy families fleeing London for a home in leafy Hertfordshire dormitory towns - and when we speak of 'affordable' housing, we don't mean the oft stigmatised term of council accommodation, but simply properties that your average local citizen can afford to purchase on their salary. Yes, more properties are being built but it's nowhere near enough to satiate demand as can clearly be seen by running your eye over the official government figures.
Can Londoners be blamed for leaving the capital? The average price of a 3 or 4 bed family home in London is approximately between £1.2m - £1.5m which would clearly require a robust household income. Contrasting this to Harpenden and St Albans where similar comparable properties would sit at around £800,000 it's making sense for families to shorten their path to home ownership by making a compromise and moving out of London while keeping their jobs and commuting into the City.
The latest data from Lloyds and Halifax show a 3% quarterly rise in national house price growth, a 2.7% month-on-month increase from July to August, and a significant rise in mortgage approvals - this is relevant because we already know that prices are rising, we know that mortgages are getting approved, and we also know that there is little stock available which simply creates the perfect storm for soaring prices.
The words on everyone's lips are "How long can this go on for? When will it end?" and the sentiment is understandable - household income adjusted for inflation has actually left many families with less overall to spend on a day-to-day basis which goes further to exacerbate the obstacles to home ownership in the local area. The fact remains that the lucky few who are able to overcome the challenges faces by those entering the housing market are either working hard to pull in a handsome salary or have liquid assets which can create purchasing leverage - banks are working harder to make lending on home purchases a greater possibility, but those under 35 are split with the looming spectre of rising interest rates a real possibility in the future.
For Landlords, the recent proposed changes in taxation along with tightening of restrictions on property standards and procedures will pile on additional costs in terms of administration and compliance which in turn is likely to push the cost of renting to a higher level which could increase pressure on local authorities to house the poor and vulnerable in society. Council departments are already stretched to breaking point due to government cuts which saw many staff attending the job centre rather than the civic centre.
Greater pressure is now upon all of us purely in terms of the shortages of available housing as figures show net migration to the UK in the year ending March 2015 to be 330,000 - the highest it's ever been. Irrespective of the political landscape or any personal views on the issue, the fact remains that the pressure on the affordable housing market will increase, and with land at a premium, will house builders be in a position to sniff out deals with enough margin in order for building more homes to be worth their while?
Certainly at the moment many new developments are sold off plan before they are even finished and house builders are making hay while the sun shines, however the grim reality for local people is that Harpenden may soon become just the place where they grew up, and towns such as Dunstable, Leighton Buzzard, Milton Keynes and Northampton will benefit and suffer in equal measure from an influx of Hertfordshire born and bred families with a bright future in a more affordable district.
We've lived in St Albans since around 2003. We paid £137K (with a £7K deposit) on a 3 bed ex council house on the Cottonmill. 3 years later we mortgaged ourselves to the hilt to spend £330K on a 4 bed detached on the Verulam. Our equity had gone up to around £80K in the 3 years we lived in our first house, so we ended up with a mortgage of almost a quarter of a million pounds.
ReplyDeleteNow fast forward to 2015, thanks to the house price bump the properties on the King Harry playing field development have given our estate (if you can spend £750K on a 3 bed terrace with little or no garden there, you can look next door to the Verulam and see that your money will go further), we're looking at a house that would fetch approaching £650K, and still appears grossly "undervalued" by St Albans standards.
It's madness. It's a nice enough family home but out of reach of anyone who hasn't been on the property ladder for a decade or so. Ironically we can't move locally because to move anywhere that would be better would add another couple of hundred thousand to our mortgage, something I'm not willing to do.
Property first and foremost should be somewhere to live, not an investment.
Hi Alex - thanks for your comments.
DeleteI agree whole heartedly about your sentiment that property should be a home and not an investment - the property market has in many cases replaced traditional income streams and in affluent areas such as St Albans it has rewarded many, but the double edged sword as you so succinctly point out is that everything is relative - we are victims of our own success in as much as upward mobility is starved once the local area approaches critical mass, price wise.
It's a question of value, and many people echo a similar sentiment that moving locally just isn't worth it with prices where they are, and moving away isn't an option - all the while there are droves of new buyers moving from London who are cash rich as the value difference is marked enough for them to purchase a lovely property near good schools with a large garden and parking - lack of stock and a huge number of buyers is keeping prices high, so unless there is a drastic change in the markets we can expect this to continue.
All is not lost however as there are deals to be had on properties that require work or properties which may be in upcoming areas. As ever I suppose it's a question of compromise and personal preference, which is what is so fascinating about property - it all comes down to individual taste at the end of the day.