Market Analysis Winter 2010/11


Banks still have large margins meaning they can keep mortgage rates low even if swap rates or the base rate rise.


The impact of austerity


In the last Winkworth Market Report we started to see the impact of the austerity measures imposed by the coalition government feeding into the property market from both the low numbers of properties coming onto the market and the reduced number of prospective buyers. The Bank of England has confirmed in its recent report on credit conditions that this was the case. And we saw this trend develop further as we approached the end of 2010 and consumers felt an acute sense of uncertainty over the future of the economy.


London


The London property market continues to outperform the rest of the UK and exists in something of a bubble when compared to other regions. However, the London market is not without its particular trends and nuances. The general London market has been dominated by a lack of quality new stock and many Winkworth offices in London are crying out for quality properties to refresh their stock. But these properties need to be correctly priced. As one franchisee put it “in this market, correct pricing is king”.


While overall demand has fallen, those buyers in the market are discerning enough not to pay over the odds for


6 Market Analysis Winter 2010/11


properties that are not deemed to be worth it and any property that has been overpriced is likely to sit untouched before a price adjustment is made. There is much competition from agents in securing the best properties and vendors should be cautious of those who may over-price in order to secure an instruction. Vendors must take into consideration the prices that similar properties in their area have actually sold for.


The availability of mortgages has had some impact on London’s property market, however, as we go on to explain later, it is movers with a large amount of equity and first-time buyers fortunate enough to have had support with their deposit who make up the bulk of London’s current buyers. And these buyers are able to secure relatively affordable mortgages.


2010 a better year for instructions


Even before December 2010 figures are taken into consideration the total number of sales appraisals and instructions for Winkworth offices in London are up 7% and 30% respectively compared to the numbers for the full year in 2009. This shows that while a similar number of owners had their properties appraised in 2009, nearly a third more owners went on to instruct an agent in 2010 compared to the previous year.


In March and April 2010 we saw the peak of owners bringing their properties to the market as the pre-election momentum in the housing market encouraged owners


200


100 150


50 0


to cash in on their properties. This momentum began to fade after the election, however, and since then there has been a steady decline in the number of appraisals and instructions – apart from a slight late summer pick-up – as confidence in the market waned and media sentiment around the future of the economy discouraged vendors. (Figure 3)


%


-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6


2004 2005 2006


2007


2008


2009


2010


GDP annual growth GDP quarter on quarter growth


Figure 3 London - sales appraisals & new instructions Jan 2009 = 100


200 250


100 150


50 0


Sales Appraisals


As one franchisee put it “in this market, correct pricing is king”


Properties on Market 40 30


10 20


New Instructions to Sell


Jan-09 Apr-09


Jul-09 Oct-09


Jan-10 Apr-10 Jul-10 Oct-10


Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10


%


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