By Graham Norwood
The election could bring house sales to a halt at what is traditionally the busiest time of year. Graham Norwood offers tips for sellers and finds bargains for buyers.
Last week’s report that the housing market could be facing a double-dip recession, with March showing the slowest rise in prices for eight years, is hardly buoying to the spirits. To add to our woes is the impending election, which, experts predict, could bring the housing market’s traditional spring sales-fest to a complete halt.
Rightmove, the housing website, says that the rise in prices in England and Wales was the lowest it has ever recorded for the month, in part because of a surge in people putting their home up for sale. While that could be a nightmare for anxious vendors, lucky buyers could get a home at a bargain price. But will it make any difference to the housing market whether it’s Dave or Gord in No 10 after May? And what should buyers and sellers be doing in the meantime?
There is growing speculation that next week’s Budget will be followed quickly by the calling of the general election; from then until well after polling day, if the past is anything to go by, buyers will sit on their hands.
Analysis of sales since 2003 by housing market commentator Henry Pryor shows that 25.3 per cent of British annual house transactions occur during the March-May period, so in theory the election could slow or halt a quarter of 2010’s sales.
But the worry now is that the belt-tightening likely to be announced by the new government — of whatever colour — will prolong market torpor well into the summer and even beyond. Worse still, a hung parliament may result in a second election in late 2010, further delaying house sales and a wider market recovery.
Even before the election gets under way, there are some signs that the underlying position of the market is not as strong as some have believed.
Hometrack, which analyses data from 1,600 estate agents offices in England and Wales, shows recent price rises occurred in fewer than 30 per cent of postcode areas — more than in the bleak periods of 2008 and 2009 but far below the 45 per cent seen before the downturn, or the remarkable 80 per cent seen back in the heady days of 2004 and 2005.
Until recent weeks there was a shortage of homes on sale compared to buyers, right across Britain, but evidence suggests the reverse is now true. A photographer hired by many London estate agents reports a 40 per cent rise in business — meaning more homes are on sale now. Likewise buying agents, often tipped off about homes before they go on sale to the public, report their email inboxes filling with new instructions.
At the same time, the prospect of a too-close-to-call election this spring is deterring buyers.
“Forecast budget cuts and potential tax rises are causing many prospective purchasers to wait and see. The sooner an election, the better,” says Alex McNeil of Bramleys estate agency in Calderdale, Yorkshire.
“Too many uncertainties are causing an uneasy feeling among buyers. Get the election done as soon as possible,” pleads Mike Sarson of TW Gaze estate agency in Suffolk and Norfolk.
HOUSE SELLING ADVICE
“Sellers in an uncertain market should do three things,” says David Adams of Chesterton Humberts estate agency. “They can have more open days, have larger and better brochures, and finally they should get the agent to take out more national or regional advertising.”
These are tactics being pursued by Nigel and Gillian McCartney, who live near Bury St Edmunds in Suffolk. They say they must sell by the summer, whatever the state of the property market. They own a five-bedroom farmhouse, with six more bedrooms in a separate barn and cottage, which they run as a b & b (applemount.co.uk), and their property has more than six acres of land.
“We live on the edge of the catchment area for a school that’s just won an excellent rating from Ofsted,” says Nigel, a telecommunications consultant. The house is for sale at £1.45 million through Savills (01284 731100).
HOUSE BUYING ADVICE
However, the McCartneys may have to fend off predatory house purchasers if the market struggles during the next few months.
“Buyers must exploit the election. They must know what drives a vendor to sell when the market is slowing — is it a death in the family, debt, or some other issue that means they must move fast, come what may?” says Tracy Kellett of BDI Homefinders, a buying agency.
“Information is king and when you know how urgently a vendor needs to sell, you can negotiate accordingly. There are opportunities for buyers if they do their homework.”
But opportunistic buyers should act quickly. Many agents believe the long-term consequence of more straitened times after the election will be that sellers and buyers alike will sit on their hands until economic improvement; homes will be withdrawn from sale and moving plans will be deferred for one, two or three years.
“In the past people have voted for one party or another hoping it’ll get in and leave them alone. The difference now is we know whoever wins, they’ll be after us for tax rises and spending cuts,” David Adams says.
“What that may do to the property market is an unknown quantity — and rather worrying.”
WHAT THE EXPERTS SAY ABOUT THE MARKET AFTER THE ELECTION:
Lucian Cook, Savills “Without doubt, and probably regardless of which party wins, an outright majority would be the best outcome for the housing market. Sellers expecting to cash in on a perceived demand-supply imbalance could be disappointed. Buyers may have an opportunity to bid in a less fiercely competitive market, but should not expect a rush of stock to the market.”
Robert Bailey, buying agent “Foreign buyers are capitalising on sterling’s weakness and we predict this will continue, especially if a hung parliament contributes to the pound’s woes. Long term, the central London housing market will continue to do well. Recent months have shown that people will tolerate higher taxation rates in exchange for the quality of life available in London.”
Mark McAndrew, Strutt & Parker “We reckon the market is going to kick off with a vengeance after the election. Over the past few months it’s been an excuse to sit tight and not do anything.”
Drew Wotherspoon, John Charcol “With the result of the general election not quite the forgone conclusion it was a few months ago, we are likely to see a negative effect on mortgage pricing, particularly fixed rates. The markets simply cannot abide uncertainty. So, while all logic dictates that variable-rate mortgages are still the product of choice for most, with pricing around 2.5 per cent better than fixed-rates, there is an argument for battening down the hatches now and locking into a fixed rate for at least five years.”
Tom Hudson, country buying agent, Middleton Advisers “Historically, the general election has had very little effect on the country house market. It generates more hype rather than having any real impact. If anything it is the pre-budget period which tends to be more intrusive on the market, as any stamp duty increase will always have a major impact on decision-making.”
Camilla Dell, buying agent, Black Brick “If Labour wins, it’s possible that prices will go down. Some high net worth individuals may relocate and move out of the UK as a result of tax rises. But if it’s the Tories, prices may also fall. They are likely to cut public spending more aggressively than Labour. If there’s a hung parliament and the pound plummets, then international investors will pile into the London property market.”
Penny Court, Beauchamp Estates “The best thing that will happen if the Tories win is that HIPs will be abolished and, once a deal is agreed, the need to get an energy performance certificate will be held off until a later stage in the sale. This will certainly increase the flow of properties coming to the market from timorous vendors, which in turn will open up the market in terms of choice for purchasers. A Labour win would mean no chance of abolishing HIPs, though the election of a Labour government has brought about a more active market in the past. But this time around, with the continued reluctance or refusal of the banks to release funds at the low end of the market, any government is going to face a real challenge in terms of being able to influence the market and increase the volume of sales.”