Top Estate Agents' Look Back at 2015 and the Outlook for 2016
- AuthorPaul Hajek
We asked those very same Estate Agents similar questions last year which you can read here.
We reported last year that there was a general mood of optimism.
But what did happen to the Housing Market in Chipping Sodbury and South Gloucestershire?
Here’s what Stuart had to say:
2015 was an interesting year for the property market.
The Government ignited prices by revisions to Stamp Duty Land Tax which coincidentally came into effect just before the General Election and on the back of last year’s “help to buy” scheme.
The impact of “help to buy” in 2014 gave rise to a 10% increase in prices.
The feel-good factor of the lower rates of Stamp Duty for the majority of buyers gave impetus to a second surge in prices of 10% this year and in some instances by a staggering 20%; well beyond most “experts” predictions in 2014.
That is well ahead of Nationwide Building Society’s analysis released at the end of November 2015 that UK prices rose on average by just 3.9%.
Demand has once again outstripped supply for all style of properties and price ranges.
First time buyers were in greater abundance this year and were particularly aggressive in their bidding with a large number of sales being agreed considerably over the asking price.
Lenders have been actively competing for business with lots of attractive mortgage deals on offer.
Speculation over interest rates continued throughout the year. The near zero rate of inflation in the economy blocked an increase in UK interest rates for the time being.
The U S Federal Reserve had been hinting at an increase in interest rates for he past 18 months and eventually moved upwards on the 16th of December by 0.25%.
The amount of the increase is not important. It should be viewed as a landmark event, a statement of confidence that the US economy is now officially in a state of recovery. To quote Winstone Churchill “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning”.
The best guess is that the Bank of England will follow suit in the second half of 2016.
Now some thoughts from Nick:
The Housing Market was definitely an improvement on 2014.
The local Housing Market suffered a shortage of stock, closely followed by 3 to 6 months delay in the Conveyancing process – it’s getting slower, probably as a result of cut-throat competition in the conveyancing world, resulting in overworked and underpaid conveyancers.
Private sales accomplished a 90% asking price to actual sale price that was the result of realistic pricing instead of trying to beat off competition from competing agents by over- pricing. Auction sales achieved more than 100% of guide price.
So What about 2016?
What opportunities and threats should we look out for?
Back to Stuart:
- The biggest question for 2016 relates to the likely effect on the property market of the additional 3% Stamp Duty applied to second home buyers and investment landlords due in April 2016.
Strangely, the Government are hitting the very people who kept the property market alive when lenders had for years blocked out first time buyers for the best part of 5 years with the requirement of a 20% to 25% deposit.
It should be remembered that without investment buyers the property market would have collapsed in 2008 and for much of the following six years.
To deliberately exclude a section of buyers from the market place is extremely dangerous when IF MORE PROPERTIES WERE BUILT there would be room for first time buyers and rental investors.
- The double effect of the Governments Help to Buy and Stamp Duty revisions are the cause of rising prices during the past two years not the activity of rental investors and the hobbling of investment buyers will in my opinion be extremely negative and potentially very dangerous for the future.
- Buyers of property are happy to part with their money but apparently do not like paying tax.
Properties previously selling at £250,000 are now selling for £300,000 with buyers prepared to spend an extra £50,000 in their purchase price happy in the knowledge that the bill for Stamp Duty has been reduced by £4,000.
We only need to look at the high end of the property scale where the increased cost of Stamp Duty has had a hugely negative impact. The London Market in the £1.2 - £1.4 million price band has just about come to a standstill. It can be assumed that buyers in that price range are not particularly strapped for cash so this dramatic fall off has nothing to do with affordability, just the revulsion against paying additional tax.
And what does Nick predict?
- There could be possible short term effects of protracted implementation of Stamp Duty Surcharge on Buy to Lets.
I am old enough to remember the heady days of 1988 when the Government gave 6 month advance warning of withdrawal of double Mortgage Interest Relief (MIRAS).
This resulted in a virtual stampede of property buying to “beat the deadline.”
Property prices increased by 40% with a freefall in property prices of 25% in the aftermath. I hope that the law of unintended consequences will not apply this time.
My guess is Buy to Let (BTL) investors will avoid buying altogether until after the deadline, then pick up BTL’s at reduced prices caused by the 3% surcharge.
My best guess is a 3% drop in first time buyer (FTBs) homes, which may help FTBs but will negate the effect upon aspiring landlords of the 3% surcharge, rendering the entire exercise worthless.
Another classic example of Government-imposed cost; the administration of which will be borne by the taxpayer, in return for little or no change in property prices – except 3% extra tax raised for Government coffers.
Housing Market History demonstrates that short term meddling usually has disastrous effects upon a commodity as sensitive as the property market, as it settles down after being upset.
- Uncertainties about Europe, the effect of extended bombings abroad, interest rate rise in USA (will it come sooner here than expected, as UK usually catches a cold when US sneezes?)
- Online “agents” offering the Earth in return for upfront payments, pretending to provide the service required to effectively sell and progress a sale.
Online Agents appear cheaper than traditional estate agents, but rarely achieve a sale and usually waste an aspiring sellers money due to ineffective or zero sale progression management.
And, this during a time when there is a shortage of stock and effectively keeping a property off the market for 3 to 6 months.
- Continuing delays in the conveyancing process – not a phenomenon experienced in property auction work. Interestingly, online auctions are showing only 50% success rate against my own public auction experiences of virtually 100% - a good example of the true benefits of hands on experience, even if it costs a little more, it’s more than twice as effective.
- The British love of home owning may well overcome all these things, assisted by a simple desire to ‘move on’ after a period of waiting during 2015.
What does Paul Hajek think?
A big thank you to Stuart and Nick as ever for their valuable insight.
We will watch carefully whether the Government’s attempt to ensure more properties are available for FTBs at the expense of Buy to Let investors can be accomplished.
The Conveyancing process, as Nick Cragg points out, can be slow. Many Conveyancers left the profession in the Recession and clearly shortages of Conveyancers have been challenging.
The Conveyancing process has not been helped by corporate Estate Agents (as opposed to independent Agents like Stuart and Nick) and other Estate Agents keener on receiving Referral Fees from Conveyancers who they know are inefficient and at best overloaded.
The spectre of Conveyancing chains makes the process painfully slow as we can only go as fast as the slowest in the chain.
Local Authority cut backs can result in some areas (luckily not in Bristol and South Gloucestershire) of delays in processing Local Searches of 6 weeks or more.
We would very much concur with Nick’s comments on Online Estate Agencies.
The sale only begins and does not end with when a buyer is found.
The best Agents (and we would certainly include Stuart and Nick) have vigorous checks and counter checks and relevant sales progressing to ensure delays are monitored and bottle necks addressed.
One of our clients lost a sale when the Buyer had used an online Agent and a Volume Conveyancer. Neither processed the sale relying on others to do their jobs for them. The result was that everyone one else in the chain was ready to exchange but the Online Agents sale had fallen through and they didn’t bother to tell anyone.
Our advice: Don’t use Online Agents nor Volume/Conveyor Belt/ Factory Conveyancers.
A Happy New Year to you for 2016, which as Stuart predicts, “will be an interesting year for the Housing Market.”