Houses stand by for lift-off
Sunday 16 June 1996
The change in emphasis suggests the housing market may finally be on the turn. Estate agents' claims about the ease of selling are based on a "shortage" of good properties: they are selling the properties on their books faster than they are taking on new properties to sell.
David Wood, managing director of Black Horse Agencies, says: "We are not seeing householders coming forward to put their properties on the market. The stock of instructions is going down."
Mr Wood says that, according to industry figures, agreed sales so far this year are running more than 20 per cent ahead of the total for the first few months of 1995. Yet new instructions to sell are up by only 5 or 6 per cent.
As one salesman from a small estate agency operating in some of the more fashionable parts of south-west London says: "With one out of three offers we receive, we are having someone else bidding on the property at the same time.There is a shortage of property and has been for some time. Good properties are going very quickly."
Part of the problem may be that people are looking for somewhere to buy before putting their own house or flat on the market.
This imbalance between demand and supply means that home owners with the right sort of property stand a much better chance of making a quick and straightforward sale than they did in the early 1990s. Mr Wood says: "In general, if you've got the pricing right, the right agent and the right marketing, [selling your house] need not be a very painful process."
A report from Black Horse Agencies earlier this month found that in a few selected "hot spots", the average selling time - the period from putting your property on the market with an estate agent to agreeing a sale - had fallen dramatically below the national average of 21 weeks. The average in Reading was only five weeks, in Portsmouth it was six weeks, and in Guildford, Hove and Cambridge it was eight weeks.
The types of property in short supply vary from region to region, but the demand is for nothing terribly exotic. According to Black Horse Agencies, the main need is for more three- and four-bedroom houses.
Anyone trying to sell a small flat or a maisonette - the starter homes of the 1980s - faces more of a problem. As Woolwich Property Services points out, today's typical first-time buyer is older and more likely to have started a family. With both interest rates and house prices low, first-time buyers no longer need to scrabble to get on to the bottom rung of the property ladder. Many could buy homes for much less than they now spend on paying rent.
Gary Marsh, head of corporate affairs at Halifax Building Society, says: "For those who are in the market, price is not their main concern. They can afford to pay a little bit more to get what they want."
The imbalance between supply and demand can be seen in the surprising strength of prices this spring. The Halifax house price index has shown four consecutive monthly rises of around 1 per cent, prompting the society to increase its 1996 forecast of house price rises to 5 per cent. While this may seem paltry beside the huge rises seen in the ultimately disastrous boom years of the 1980s, it should be enough to build confidence among those who put off a purchase through the long recession and have remained cautious during the economic recovery.
Rob Thomas, housing market analyst at City investment bank UBS, believes the strength of the Halifax index is so compelling that he is thinking of raising his own forecast for this year to 6 or 7 per cent. He also expects prices to keep rising next year and in 1998. He says: "We've got an economic upswing continuing well into next year. We're in the late part of the recovery - that's the time the housing market is most likely to be strong. This year, the market should also benefit from the tax cuts made in the last Budget."
Mr Thomas estimates that the difficulties of the past eight years have persuaded about 500,000 first-time buyers to delay their move into the housing market. This represents substantial pent-up demand. If they began buying in significant numbers, they would give further impetus to the housing recovery.
As house prices rise, the negative equity problem will rapidly diminish. On UBS estimates, the number of home owners whose mortgage debt exceeds the value of their property will fall from just less than 1 million now to about 260,000 by the end of next year.
So far this year, the total number of house purchases and sales has remained relatively modest. One concern is that the market is being held back by some over-ambitious vendors. As prices start to move upwards after a long period in the doldrums, some are testing the market by setting asking prices a little above their "true" value.
Black Horse Agencies' Mr Wood suggests this may be an inevitable feature of a turning market. "Purchasers are still nervous because of the history of the early 1990s," he says. "The difficulty is matching the expectations of vendors and buyers."
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