Can’t afford to buy, can’t afford not to buy,” was the resigned lament of a wannabe London homebuyer during the recording of a Radio 4 documentary series.
By the time it was aired two weeks ago — who knows — she might have encountered a few more sellers.
It’s a brave business predicting reversals in the fortunes of London property, but the latest batch of data more than hints at something of a handbrake turn from a sellers’ into a buyers’ market. Given the gestation time of a typical BBC probe, the American woman quoted during the Sunday evening series on the housing market was probably recorded in spring, accompanied by fraught observations of bubble-like practices such as the emergence of sales by tender (the buyer pays a finder’s fee).
A few days later the RICS survey for July — which was best described as patchy but benign for the rest of the country — showed almost symmetrical swings since April in the balance of power between sellers and buyers within the M25.
The net balance for new buyer enquires was -33% (the percentage of agents that had seen an increase in buyers during the month, minus the percentage that had seen a decrease). In April it was +2%. The reverse could be seen in new instructions from prospective vendors, up from +1% to +33% (it had been an even higher +45% in June).
This was hardly good news for agents, who depend on volumes more than prices: the balance for newly agreed sales slumped to -25% from +13% in the heady days of April. The capital was the only region in mainland Britain to register a negative reading.
As to the $64,000 question — pricing — respondents were a bit more circumspect. There was a +10% balance for prices having increased over the previous three months, but this was down from the +50% registered in May and 30% in June and a peak of +100% last October. This was essentially backwards looking, though; what about the future? Here the agents turn a bit more fickle. Looking three months ahead, a small -2% was recorded (the only region to expect a fall). But on a 12-month view, the same agents registered +33%.
Ever the optimists? Perhaps. The sales to stock ratio (a straight number, not a balance) was 0.46 in July, still one of the highest in the UK, but well down on the recent peak of 0.76 in February. “Very few new enquiries and not much serious intent to buy unless good value is perceived”, was the terse appraisal of Kevin Ryan, of Carter Jonas’s Mayfair office, in the ever enlightening selection of comments at the back of the monthly report.
Charles Puxley, Jackson-Stops & Staff of Chelsea, noted, more loquaciously: “Central London is very quiet, evidenced by the supply of parking spaces. Seems to be a distinct lack of enthusiasm by potential buyers to come and view and when they do they are quick to see that we are in a lull.”
Almost on cue, a few days later the Rightmove survey noted a 5.9% fall in asking prices during August in London (the main driver in a more modest 2.9% reduction across England and Wales). This was the largest of three consecutive falls in the capital and the report was accompanied by Battersea agent James Pendleton observing “a huge increase in the number of properties coming to the market in recent weeks”.
Might this all be a temporary hiatus? (I offer this as a potential get-out clause, having stuck my head out in the past and ended up with similar results to Vyvyan from The Young Ones doing likewise on a train). After all, Bank of England governor Mark Carney — whose scary comments at the Mansion House in June seemed to coincide with much of the slowdown — turned all dovish again in the August Inflation Report. Lending figures in the past month suggest banks seem to have caught up with their paperwork following the introduction of tortuous form filling required under the Mortgage Market Review.
But a lower-profile survey than the RICS’s indicates the move to a sellers’ market may be more protracted. The quarterly Halifax Housing Market Confidence Tracker, which measures public attitudes among potential buyers and sellers — and is thus even more long-range than the RICS’s enquiries and instructions data — shows a sudden fall in those who think it will be a good time to buy a property over the coming 12 months (a net balance of -19% in the second quarter, from +4% in the first) and a rapid turnaround in those owners who think it will be a good time to sell (+44% from -2% a year earlier).
If the gloomy scenario does come to pass — and it’s a big if — sellers may find out that, as has happened in previous cycles, a buyers’ market can be something of a misnomer: given falling prices, buyers disappear altogether.
It could be sobering to find out whether the desperate would-be buyer had finally found a place. And who might be popping the champagne, buyer or seller?
Alastair Stewart is housing and construction analyst at Progressive Equity Research