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Fewer buyers and falling prices halt house boom
Mira Bar-Hillel and Anna Davis, Evening Standard30 Nov 2007
Frenzied "open house" viewings and sealed bid auctions that marked the peak of the London property boom have all but disappeared.
Agents say the days when scores of desperate buyers would fight it out with offers well above the asking price are over. Figures from the Bank of England yesterday showed a sharp fall in the number of buyers after a collapse in confidence, rising borrowing costs and the credit crunch hit the availability of mortgages. Asking prices are down about five per cent on their summer peak and buyers have become more cautious.
James French of agents Douglas & Gordon said: "Six months ago holding an open house was a good way to allow large numbers of buyers to view a house at the same time. It also gave buyers an idea of how popular the property was. We would then often go for the sealed bids process and the winning bid was often well above the asking price.
"Today, with 30 per cent fewer buyers, the open house approach won't work. Buyers are offered a selection of properties to view and don't have to rush to see one property.
"Equally, any offer at the asking price is likely to be successful.
"I would advise sellers who cannot find a buyer to reduce the price but not take the house off the market." Phil Spencer, presenter of Channel 4's Location, Location, Location, said: "The market is stabilising and calming down again.
"Back in the summer we were hearing stories of sealed bids between eight or nine people bidding for exceptional properties at the top end of the market.
"Now it's back to around two or three and it's only the really desirable properties that are going to competitive or sealed bids."
Andrew Weir of Foxtons said: "We do get the odd sealed bid but they are not happening as much because the market has changed.
"I would tell people who want to sell, wait until after Christmas but if you want to buy you should be out there now. There is a window of opportunity because there is less competition.
"If the market has dropped by 10 per cent, you could sell your £500,000 home for £450,000, but then if you buy a £1million house for £900,000 you will pick up money. The clever money is trading up.
"First-time buyers are also using the softening of the market to get on the property ladder before it recovers, which I believe will be in spring."
Tim des Forges of W A Ellis said: "There is not the volume of people looking at the moment as there was six months ago. People have been used to the boom of the last 18 months and are obviously more uncertain. The agent has to work a lot harder now."
He added: "Unmodernised flats will get more interest from buyers and developers because people can put their mark on them."
Reader views (14)
In my opinion forget London and move to another European city. We just moved from London and bought a property in Berlin outright for what we had saved as a deposit for a property in London. On top of this we are living in a nice area. We had waited so long to buy in London that properties were going further and further out of reach and in the end we would have only been able to afford to live where we didn't want to anyway. Now we are living in a lovely area of a great city with virtually no financial stresses at all. Living in Berlin has opened our eyes to the fact that you should be living in a place that is about your value of life rather than the literal value of the property.
- David, Berlin, Germany, 30/11/2007 18:02
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What's happening in London is not just a short-term local softening of the market but part of a global economical cycle. House prices are already fallling in the USA, Spain, Ireland and Denmark, all of which have seen booms in recent years just like that in the UK. Now the UK has joined the slide. There won't be a rebound until the global economy rebounds, and that could be years away.
- Ben, London, 30/11/2007 18:01
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Am I missing something here. There will be no recovery of property prices in the Spring of 2008. The game is up and the reality of big-time debt is finally hitting home. When the crash comes, it will make the Great Depression look like a Sunday afternoon picnic.
- Keith, Newport, Isle of Wight, 30/11/2007 15:42
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Bring on the crash - teach the BTLers that money isn't free. If it were, nobody would work.
Sanity MUST be restored to the UK housing market for the good of the nation as a whole, not the few.
And that's speaking as a home-owner.
- Stuart, London, 30/11/2007 15:37
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"The clever money is trading up"?
Erm, haven't you read the global financial pages, all the indicators and I mean all show clearly that property is crashing. It may end in one year or 4 years but the crash is firmly here and with us.
The clever money is selling up and dropping their prices now by 20% to prevent a 30% loss in the future. There no sense owning something that drops in value £100 a day. Unfortunately, nobody needs to buy, therein lies the problem. The fastest buy to let landlords may be able to dump property at the right low price, the slowest will be bankrupt. Good luck to one and all.
- John Reagon, Oxford, 30/11/2007 15:10
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Agree with David. The guy from Foxtons is talking rubbish.
- Peter, London, 30/11/2007 14:58
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The market won't fall that much in London. There are plenty of people who have put buying on hold as prices were beyond their reach. When prices fall a little they will move to buy and the market will pick up again. Recent uncertainty and the usual seasonal lull have cooled things.
- Edward Linch, London, UK, 30/11/2007 14:55
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They want us to keep our houses on the market but lower asking prices. They would say that...need something to sell for their commissions.
I have never watched Location, Location etc, but the comments from Phil Spence are outlandish. Not sure I would want him as my financial adviser...was easy to make money in housing when liquidity was there. Not sure what he is seeing that everyone else has not noticed.
As there is no housing shortage (how many normal people actually live on the streets?) in London, and liquidity has dried up, how exactly will house prices go up...all the rubbish we have heard for years about lack of housing etc was a cover for a liquidity driven bubble. This "window" will exist as long as the credit crunch does...
Ignore everything else and base your decision on whether you think the crunch (and so repossessions owing to a lack of mortgages) will continue or not. If the crunch clears up prices will flat line (even before the crunch London prices had reached levels most could not afford or did not make sense as an investment i.e no competition).
If the crunch remains forced sales for many BLTs, self-certs will follow. Weaker economy? Less immigration and lower bonuses i.e. London (the most over-valued place)will suffer the most because of the crunch.
Oh, and an asking price from £500,000 to £450,000 is not a fall if the price last year would have been £380,000. Don't let them trick you into thinking it sounds like a bargain at 450,000!
- Raj, London, 30/11/2007 14:23
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Market recovering in spring?
Once the new capital gains tax levels come into effect in April expect a flood of buy to let property to soften the market even further. Combine that with banks cutting back on loans and I don't think I'd even look at the market for at least twelve months to two years.
- Jon Salt, Lichfield, UK, 30/11/2007 14:19
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About time the media reported the reality. How much for a new build flat in London now? Tens of thousands less than recent asking prices. This market has been talked up relentlessly by the industry/media/government. But they can't hide the reality of a crash now. Average salaries in the UK are £24K UK-wide and £34K in London - property prices have to fall. Related to this is the charming BoE inflation measure: The notion that ordinary people are only facing 2% inflation is an absolute joke.
- Richard Clifford, London, 30/11/2007 14:05
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Do Estate Agents ever tell the truth? House prices will not pick up in the spring, we have had over 10 years of house prices roaring ahead, they are now over valued by 30-40%. Interest rates are high, the banks will not lend on their previous multiples, so this market will not be fixed by the spring, perhaps it was spring 2010! The problem with Estate Agents is they talk the market up, they are still putting a spin on their comments now. Guys get real we are in for hard times ahead, my local agent has sold his fleet of Audi's and replaced them with cheaper cars, that tells its own story.
- Nick Robey, Reading, 30/11/2007 13:58
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So glad I sold at the peak and escaped the madness of London.
- Nobby Clark, Perth, Scotland, 30/11/2007 13:50
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I would not believe estate agents if they told me today was Friday.
- Tony, London, 30/11/2007 13:45
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Typical Foxtons estate agent babble. The market is weak and getting weaker yet they advise people to buy now! Just how poor can they get with such rubbish? Nobody with any sense buys into a falling market.
- David Payne, London E6, 30/11/2007 13:33
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