Fierce competition for property has brought back a much-loathed spectre of boomtime, and not just in London by Ed Cumming
You have endured the estate agents’ pointy shoes and tiny cars, and at last found a home you can imagine settling in. You’ve worked out the finances. Taking a deep breath, you’ve made an offer, perhaps haggled a bit over the price, and had the offer accepted. There have been months of stress, but you are finally set to exchange. Mentally, you are already in the removal van and plotting a trip to Ikea, when the call comes. Someone has made a higher offer. All that hard work is undone in an instant.
Being gazumped is probably the most infuriating thing that can happen to a house-hunter. It was a tell-tale feature of the booms in the Nineties and Noughties, but since the financial crisis of 2008 it has been much less common. Vendors have struggled to find any bidders for their property, let alone more than one.
Yet parts of the market, particularly in central London, are now steaming ahead. According to Rightmove, prices in the capital increased by one per cent in October. The average asking price went up to £544,232. Analyst Hometrack estimates that in the same period there was a two per cent increase in the number of buyers registered with agents, while the number of properties on the market fell 1.6 per cent. Buyers are paying 95.2 per cent of the asking price, nearly back to the 2007 peak of 95.7 per cent.
The Government’s Help to Buy scheme, which guarantees mortgages for first-time and new-build buyers up to £600,000, is only fanning the flames. Since the scheme launched last month, it has already boosted demand.
As a consequence of all this, competitive bidding on properties big and small has become a common occurrence once more. Returning with it has been its ugly sister, the gazump.
“Gazumping is well and truly back, and with force,” says Caspar Harvard-Walls of buying agency Black Brick. “The last time we experienced a market like this was in the heady days of 2007. Back then, fierce competition was mainly confined to Knightsbridge and Belgravia. Now it is happening much further outside the traditional core prime central market. This is partly because buyers have been priced out of super prime and are looking further afield. But also there is a constant lack of supply of sensibly priced, well-located properties that aren’t in some ways compromised.”
One factor is the influx of foreign money to the capital. Favourable tax laws, combined with the capital’s evergreen attractions, mean that overseas buyers are prepared to pay a premium – and act fast – to secure a piece of the action.
“Two weeks ago, we had an apartment in Portland Place that was under offer to a local British buyer,” says Simon Deen of Aston Chase. “They were gazumped by a Chinese buyer, who exchanged contracts within 72 hours of seeing the apartment, and 48 hours from when her solicitor received papers. She was buying the flat for her daughter, who will be studying in London.”
To those in the heat of things, the new intensity of the market can be challenging. Lea Karasavvas, a London-based mortgage broker, was gazumped three times in 48 hours last week, on properties that proved the situation has spread beyond central London. In Clapham and Earlsfield, in south-west London, offers on two-bedroom flats around the £550,000 mark were beaten by offers £30,000 and £40,000 higher than the asking prices. In Guildford, meanwhile, a four-bedroom house was beaten by an offer £20,000 higher.
“What’s unusual is that these clients could hardly be better prepared,” Lea says. “They have done everything you are supposed to do: they’re chain-free, with decisions-in-principle for mortgages and all their documents are ready to go. But still they are getting gazumped. It’s a sign of an overheated market: in some ways it’s a good thing, of course, but it is very frustrating for the people involved. They are doing everything right; they’re just being pipped by the aggression of the market.”
In certain parts of the countryside, too, gazumping is making a comeback. According to agents, the market there is behaving even more oddly than in town.
“I have seen a marked increase in gazumping this year at the top end of the country house market,” says Edward Heaton of Heaton & Partners. “What has been unusual is that houses which have sat for several months suddenly find themselves with two or three prospective buyers. It often begs the question why the buyers didn’t get on and try to secure the house earlier, rather than waiting until someone else makes a bid. It’s almost as if they need the reassurance that someone else likes the house. Inevitably this leads to one or more parties being disappointed.”
Estate agents usually work for the vendor, of course, not the buyer. Gazumping might not be polite, but if it gets a higher price for the property on sale – and a bigger fee for the agent – they will not be complaining.
“The property conveyancing system in this country allows a period of time for the buyer to carry out his due diligence before exchanging,” explains Howard Elston of Aylesford International. “If you want to minimise the chances of being gazumped, get ‘your ducks in a row’ before you make an offer. Speed is what every vendor wants to see to be convinced that you are serious. Consider offering a non-refundable deposit to get a lockout agreement. The ‘gentlemen’s agreement’ is a thing of the past. In London, the values have reached such dizzy heights; the more time you give a vendor the more you face the possibility of losing the property.”
If it all sounds a bit ruthless, then it is the new reality in London and parts of the South East. If you want to guarantee not being gazumped, perhaps your only option is to head to the North or parts of Scotland, where the market has yet to bounce back in the same way. But if you are joining the masses squabbling for a tiny number of properties in the most desirable areas, different rules apply. Be fast, be prepared, and hope for the best.
Thinking of moving?
Have all your finance ready before you offer. Cash trumps all, but mortgage agreements in place can help speed things along.
Chain-free deals can move much faster than properties in a chain.
Exchange as fast as possible. Make sure your solicitors know that you are keen to close.
Be direct with the agent. Clear communication adds credibility to your offer.
Say that your offer is conditional on an exclusive basis, depending on the property being withdrawn from the market as soon as your offer has been accepted.
Consider a formal lockout agreement. This is legally binding and designed to protect both parties, but can take a while to draw up.
Offer a non-refundable deposit to the vendor, guaranteeing the sale unless the buyer pulls out for different reasons.