“We’re now going to sealed bids on houses that we couldn’t get a single viewing for a few months ago.” This view from a south London estate agent is no flash in the pan. After many months in the deep freeze, the capital’s housing market seems to have thawed.
I could tell the climate had changed the second I walked into the sales and lettings agent in a leafy south-east London quarter in early February. Staff were all manning the phones and it took several minutes to prise away the branch manager. “I can’t remember anything like it. New buyer applications have doubled,” he said. “We need to hire another negotiator and maybe another administrator.”
Activity had been picking up prior to the election, a tentative trend I alluded to here last spring. But Boris Johnson’s win was the catalyst for what looks like an explosive release of pent-up demand.
According to the agent, all layers of the secondhand market have seen increased interest, from first-time buyers upwards, but demand has been strongest in the family homes segment from around £750,000 to £1.5m. Sellers are returning to the market, but not in the same numbers, fuelling 5% rises in agreed prices. There are early signs that deals are likely to be completed quicker rather than languishing in property chains – which is good for overall liquidity and agents’ cashflow.
The agent says the only bit of the local market lacking momentum is new-build apartments, which are still seen as overpriced despite coming off their aspirational peak.
His sentiment is shared, albeit with some circumspection, by an agent chum of mine in north London. “The market is definitely busier than a few months ago but its first test will come around the start of March, when we’ll see if higher demand in December and January is translating into robust offers and exchanges at solid prices – and more quickly”.
By then, there should be more statistical evidence to assess whether the optimism is really wishful thinking. There were promising signs in the December RICS survey – the most definitive guide to market trends, in my view.
The January survey will have been released on 13 February, after this column goes to press, but I’m pretty sure it will be strong on most counts. As a taster, a Rightmove survey showed a 26% year-on-year rise in sales agreed in London during January, the highest for any region in the country, which averaged a still respectable 12% increase.
Recovery from tax hits
Before this starts to sound like Islington supper-party chatter, it should be pointed out that the apparent increase in deal numbers is largely a catch-up after the impact of waves of tax increases. The most damaging of these for the mainstream market outside central London was stamp duty – and the cumulative gloom brought about by the shenanigans in parliament, now mercifully fading into distant memory.
There’s less suppressed demand in the regions, which have been less hampered by tax burdens or political intrigue, so growth is likely to be steadier and, unlike London, prices haven’t fallen. Beyond the reversal of pent-up pressure in London, an additional ingredient, ‘optimism’, is always a powerful stimulant in housing and Johnson exudes it in buckets – misplaced or otherwise.
My guess for the year is it will be a pretty benign market across the UK, with decent rises in activity and more pedestrian price increases. If this optimism feeds through to consumer confidence, I’m sure the benefits will ripple out to wider commercial real estate for much of the nation.
How long London’s new-found vigour can be sustained for remains to be seen. More sellers need to come out of hibernation; higher prices might persuade them. More bearish observers warn that any faltering progress in EU negotiations may again stymie the market. But I think people are so sick of the B-word that even the most fractious of tiffs with M Barnier will be shrugged off. It’s likely agents will be making hay again for some time to come.
Alastair Stewart is an equities analyst and consultant