|Chiswick Property Review|
Edward D'arc's Derek Fletcher gives his view of the local market
"It’s September, and as the rain lashes down against my new office window and people wrestle with their umbrellas as they walk by, I can’t help wondering what ever happened to the Meteorological Office’s much predicted and anticipated “baking hot, bar-b-q “summer," writes Derek Fletcher.
"Yet, as I’m regularly asked to predict what the property market will do, I can’t help feeling some sympathy for the weathermen’s predicament when faced with the constant demand for crystal ball gazing regarding future weather. Whilst I can understand the need to obtain some much needed guidance when trying to decide whether to holiday at home, (the new ‘staycation’) or suffer the vagaries of a weak pound and seek sun and sand abroad, I’m comforted by the fact at least the housing market is governed by a more predictable science than the weather!
"Or is it? Whilst there was heaps of evidence in early 2007 that the Property Market was over heating and heading for an inevitable crash, it still caught most people on the hop. A few obvious ‘crash’ factors that contributed to plunging demand were, amongst others, first time buyers unable to afford to buy and affordability factors generally; unattractive residential rental yields down to 2-3% at a time Banks were offering 6% plus returns; falling rental income due to oversupply, the result of the ‘buy to let’ boom; and personal debt spiralling out of control, most of which we now know was financed by imprudent bank lending. As confidence collapsed so did house prices and by the fourth quarter of 2008, evidence suggested that property prices in Chiswick were down as much as 20% to 30%.
"So who could have predicted, just 6 months later, that we would see the return of the dreaded ‘sealed bid’ and a bounce back in prices with recent house sales achieving figures not far short of those experienced at the peak of the market in late 2007!
"Yet, demand nationwide is weak. New buyer enquiries are approximately 50%-60% from peak levels and mortgage lending figures are still depressed despite recent signs of a pickup. The real issue affecting the Chiswick property market is, as I highlighted in my last issue of Property Matters, a severe lack of supply. This is particularly true at the upper end of the market where sales are often driven by equity release issues, for example downsizing when children leave home or retirement. Any fall in equity value can have a severe impact on these seller’s plans and selling is often postponed until the market picks up. In addition, fears of unemployment, general economic doom and gloom, and the resultant reluctance to increase borrowing (debt), despite low interest rates, all combine to cause a general slowdown in the housing market. Add to this the loss of as much as 10% of the Chiswick housing stock into the rental sector during the past ten years and supply will, I believe, continue to remain tight. Any pent up demand will, as we have seen very recently, lead to a rapid rise in prices when supply is so tight.
"So, if I have to indulge in some crystal ball gazing, then I believe it is unlikely the recent increases in house prices will fall back from current levels, at least in the foreseeable future. As for signs of any increase in supply, perhaps we should wait and see what happens to interest rates; a possible cloud on the horizon. But as for crystal ball gazing, you’ll have to wait until the next issue of ‘Property Matters’!"
Derek Fletcher - Edward D'arc
September 15, 2009