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How is the property market doing?
by Graham Brown
The first thing to bear in mind is that there is no one overall "property market". While most residential properties may be declining in area A, certain properties in Area B may be holding up.
What is clear, however, is that we are currently in a "cooling" stage.
Factors contributing to market cooling
Lenders tightening up on credit means less people on the market to buy
Landlords finding buy-to-let less attractive so offloading more properties on to market
Repossessions on the increase mean more cheaper properties available
Slowdown in "first time buyer" market means those wishing to sell to this market unable to move up the ladder to larger family homes
Lack of overall confidence leads to potential buyers turning to rental as an attractive option
Surveyors valuing down properties by default between 5 and 15% of market value leading to potential buyers with a mortgage shortfall and unable to complete
As with fish, gold or land - When any commodity is short in supply, its price increases. In the current market, that commodity is money and the price of borrowing is on the increase whether that be through short term interest rates or arrangement fees. The more expensive it becomes to borrow, the less people can afford to it leading to less people able to buy properties
What are the symptoms of a "cooling market"?
Large number of viewings but nobody buying or offering on properties. Buyers are "shopping around" but often lack confidence to make the move or are restricted in making confident offers on properties
Estate agents still "talk up" the market desperate to keep a large number of properties on their books. Often agents will promise full market price for their sales in order to win a potential vendor over to their portfolio when they know full well that the market is not holding up to full price offers
An increasing number of defaults, arrears and repossessions. As banks become less confident about their own situation they are less tolerant of their mortgagees. In a rising market they are more likely to be lenient on defaulting borrowers than in a contracting market as the supply of money decreases rapidly
What are the opportunities for vendors in a "cooling market"?
The good news is that there is no need to panic. Consider the bigger picture. All prices are relative. Whilst you won't get what you expected back in October 2007, bear in mind that if you are in a chain, your purchase property vendor will be in the same situation. If your property is 15-20% below what you expect your vendor's price will be impacted likewise. In this market, those with cash are in a strong position but you will remain unable to exercise this option if you hold out for a full market price
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