Why are we waiting?

20 October 2013, The Times

In some areas, buyers are breaking down the door; in others sellers struggle to drum up any interest. We reveal the length of the queues by Alexandra Goss

The Green Farmhouse is the stereotypical country idyll. The six-bedroom home, close to the Northumberland village of Wark-on-Tyne, has a tennis court and picture-perfect rural views, and is a short drive from Kielder Water and Hadrian’s Wall. Yet the 200-year-old house, which came onto the market in July at £495,000, has welcomed just seven potential buyers through its panelled oak doors.

Meanwhile, more than 300 miles away, on Davis Road, a nondescript street in Acton, west London, an Edwardian first-floor flat with three bedrooms is now under offer after just one week. It was listed at £500,000, and 38 viewers traipsed through its less than 800 sq ft of living space.

House prices in Britain have risen to their highest levels ever, according to figures released by the Office for National Statistics (ONS) last week. In August, the average property was worth £247,000, the highest value since the ONS started recording data in 1968, and 3.8% more than in the same month last year. As has been the case for several years now, London was the best performer — prices in the capital rose by 8.7%, compared with rises of 2.2% in the northeast and 0.6% in Yorkshire and Humberside. Scotland saw a fall of 0.7%.

Property experts have long pointed out the price differential between London and the rest of the country, but little has been made of what is causing these vast iscrepancies — the imbalance between demand from buyers and the number of properties on the market.

“Disparities in price recovery have been widely reported, but regional supply dynamics, while equally important, have not garnered attention,” says Doug Shephard, director at Home.co.uk, a property website. “Restricted supply has been instrumental in both preventing a greater [housing market] crash and facilitating a much more rapid recovery.”

At the moment, about 100,000 people put their properties up for sale each month, less than half the figure seen in 2007, Shephard says. And the number of homes actually selling in England and Wales is running at only 58% of its 10-year pre-credit-crunch average, according to Savills estate agency.

In popular parts of the south, there are too many buyers and not enough sellers, while it is the opposite story elsewhere. The property portal Rightmove says that an average of just 68 properties came up for sale each week in Ilford, Essex, in September, 11% fewer than a year ago and 56% fewer than in 2007. In Leeds, 230

properties were typically listed for sale each week last month, 2% more than a year ago and 18% more than in 2007.

“The media has been full of reports about rising house prices and a forthcoming property boom — this is dangerous ground,” says William Wells, director of Mullucks Wells estate agency in Essex and Hertfordshire. “The recovery is patchy.”

In London, the supply of properties for sale is down by 19% compared with this time last year, according to Home.co.uk, but buyers are out in force. John D Wood estate agency has 27 applicants for every available property in central London locations such as Belgravia and Chelsea; Marsh & Parsons is seeing 34 buyers fighting over every home it lists for sale in Westminster and Pimlico.

“We are regularly seeing properties go for £50,000 or £100,000 above asking price,” says Camilla Dell, managing partner of Black Brick, a buying agency. “It’s not uncommon for homes to be launched on a Saturday, then best bids to be called no later than 11am the following Monday.”

The problem is only set to get worse in the capital, fuelled by a dearth of new properties being built, according to new research by the property adviser CBRE. It looks at planning applications and permissions for residential units in each borough over the next 10 years, and compares this data with the projections for household growth over that time.

“We found that just shy of 305,000 new units are planned, but the number of households is set to grow by 485,000,” says Jennet Siebrits, head of residential research at CBRE. “Straightaway there’s a shortfall of almost 200,000, and that’s not even factoring in variables such as immigration.” The figures show that the problem will be worst in Richmond, with a predicted 22 new households for every property being built. In nearby Teddington, Jackson-Stops & Staff estate agency says that every sale is going to sealed bids.

Outside London and hotspots in the southeast, it is a different story — in the northeast, for example, the supply of property has risen by 16% in the past 12 months, keeping prices subdued. In Newcastle itself, an average of 77 properties came onto the market each week in September, Rightmove says — 4% more than the same time last year and 1% more than in 2007.

Haart estate agency, which has more than 133 branches across Britain, has analysed its data on supply and demand for The Sunday Times. It found that in Northampton there are 13 buyers fighting for every home for sale; yet in Swinton, Rotherham, Grantham and Sheffield, there are only three.

“While some areas are experiencing a shortage of properties, the north of England still has an oversupply, and there remains a lack of urgency on behalf of potential buyers,” says Stephen McOwan, partner at the Corbridge office of Smiths Gore estate agency. “We have only just seen the first signs of price stability after six years in the doldrums. Such recovery tends to occur from the bottom up — there are three times more properties under offer below £500,000 than above £1m.”

What does this mean for buyers and sellers? In essence, properties outside the hotspots take a lot longer to sell. Homes in the south, the east of England and the Midlands sell in an average of 84 days or less, falling to 20 days in popular parts of London, Bristol and Cambridge, according to Home.co.uk. In Mablethorpe, Lincolnshire, however, it typically takes 246 days for a property to go under offer.

Yet there is good news on the horizon. “Buyer demand has increased over the past couple of months, driven somewhat by the Help to Buy scheme,” says Kay McClure, northeast regional sales manager at Bridgfords estate agency. “This is stimulating the local housing market as a whole.”

 

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