For the second month running, the amount of property available for sale is steadily growing.  It is still less than this time last year, but only by 7%.  The number of new properties coming to the market is also healthy – not as many as in January, but still 40% more than February 2009 and likewise valuations are up 32% for the same period. 

There is still a strong desire to invest in London property with sales applicants remaining at the same high level as January and the number of sales agreed higher than in any of the previous 12 months and 38% more than February 2009.

Prices in Central London will therefore continue to rise, as heavy demand remains. However, with more stock slowly becoming available, the rate of price growth should begin to slow.

Residential Lettings

We reported last month how concerned we were about the lack of supply in the rental sector and regrettably, February figures have not provided any reason for optimism.  The last time D&G did so few rental valuations was December ’08 (not a notoriously busy month in any year).  The total number of properties available to let fell again in February, although only fractionally, but it is still 68% less than this time a year ago. 

In January, Douglas & Gordon reported more prospective tenants registering than ever before.  However, in February, registrations fell back to a more normal level, similar to this time last year.

The reason for this continued lack of stock is predominantly landlords deciding to sell as the value of their property recovers. Even though the demand for rental property is slowing (because investing is now seen as a better option and because seasonally this is a quiet time of year), rental values will still continue to rise because of the continued lack of stock.

Some of the people commenting are patently obviously out to use various forms of media, like Twitter and facebook, those that many journalists tend to keep an eye on, in order to maximize their coverage. That’s fair enough, so do I. But there was a tweeted article yesterday from someone stating that “agents for the most part only do what vendors could do themselves – list their property online” and this from someone claiming to have founded a successful private selling website. I looked at the site and in the whole of greater London they have four properties for sale. Not exactly a foundation for informed market comment, especially when aforementioned person further claims that “If it wasn’t for agents, property prices would probably be a lot lower”. 

I wonder if this person, as an industry expert, actually has any idea of how a market works, or how one goes about using that market to best effect, or even why and how people buy property. 

Buying a property is, for 99% of the time, an entirely emotional process, and the same model that applies to selling a car will not, and can never, be replicated with property.

 Thank heavens for all of us but we live in a free market and a market functions by simple economics, demand and supply. You can’t buck it. If you don’t like it go and live in China or a Country where there is a different dynamic like France and property prices rise less quickly. And just like it says on the packet, the value of your investment can go down as well as up.

 What irritates me most is the moronic statement many make about agents doing nothing to earn a fee and that it’s money for old rope. A good agent will spend (in our case many millions) a fortune making sure that their buyer registers are stuffed full of buyers so that when you bring your property to that agent they’ll have plenty of buyers to get round and get you the best possible price. Yes, you can advertise in the back of the papers or online, and you might even get a couple of viewings, but you won’t get the full picture and will almost always lose out as a result.

 If you don’t trust your agent to have a long list of buyers and that you think they’re talking bo**ocks, ASK TO SEE THEIR LIST (I carry an weekly updated list to very appointment), it’s not rocket science and don’t be fobbed off. 

Otherwise, and as so often seems to be the case, you’ll get the agent you deserve.

I spent it with Stephen Yorke who is CEO of the Prime London Capital Fund, an open ended fund which now has a three year track record and is pretty much the only player in Town offering a real time snapshot, as well as an opportunity to invest in, true prime central London property. It has £40m now under management and invests only in specific prime addresses and as such is perhaps a better guide as to what’s happening than the ubiquitous Savills and Knight Frank indices. It’s ability to give solid information is vital and the valuations on it’s clearly identified portfolio are monthly, via two different valuers, and keep a close track on exactly what’s happening to values allowing very little room for conjecture. 

Stephen annoys me intensely at times, I have told him this, because he’s a procedures and details man and I’m not. But, you need someone like that to run a fund and he’s a man who’s spent a varied career working, as far as I can see, between number 10 and the City. As such his observations are salient and worth listening to as he also has a wonderfully objective view about that very narrow slice of the market known as prime. 

To summarise some of his views, and I share many of them, and tackle issues raising their heads at the moment; 

Rising inflation is likely to subside because of what was happening this time last year and it would therefore seem that pressure has to be down later in the year. Indeed BoE seems much more sanguine about inflation than it does about the risk of a double dip recession, the avoidance of which remains it’s priority. 

Much has been made of the potential for whoever takes over at the Treasury to open Pandora’s Box and faint at the sheer awfulness of it, but surely much of this shock has already been factored in. There’s a strong argument that UK PLC is in better shape than many to bounce back quickly (as it usually does unlike the better damped French and German Economies) and that although our deficit is high fiscally it could be a lot worse. 

Money has to go somewhere and given that whoever wins the next election, including a hung Parliament, is going to be taking between £80 and £100 billion out of the Economy over 4/5 years it makes sense that gilt yields and interest rates will stay lower for longer and that has to be a good thing for prime property. Many of the big institutions seem to be eyeing up the residential sector and anyone doing that has to target prime London property as a part of any portfolio with it’s excellent hedging qualities. 

It seems that demand for office space in the City is very much on the up so the vaunted talent flight doesn’t seem to be happening and with office rents going up dramatically occupancy seems guaranteed. These highly paid workers need to rent or buy. Regulatory risk seems to be running against NYC and in London’s favour as well. 

The snap back of Prime values has been fast, as we forecast, and although it won’t continue at 10% per quarter, it’ll soon have regained the 27% it lost between Sept 07 and March 09. It seems likely that these values will overshoot peak 07 values. 

The Eurozone is something of a side show for prime London although again fiscally it would appear to be in good shape if existing issues can be sorted out. With Sterling looking as if it’ll stay weak for the foreseeable future this extra demand will help push up prices.

 I appreciated Stephen’s input, and for someone who’s been turned into a pessimist over the last two years it’s almost enough to turn me.

syorke@dngim.com

This has little to do with property really but driving around all day everyday my eyes have been opened to the perils of something that’s meant to actually help us drive around all day. 

I’d like to talk, if I may, about the unbelievable and clod hoppish phenomenon that is the screen mounted sat nav. Rather like mobile phones the penetration of these ubiquitous gizmos must now be close to 100% and you’ll see them in cars from Park Lane to Peterhead. 

I still have to use a map because my car has only got a stupidly expensive proprietary system that leaves the last two postcode digits off (come on Audi) and costs all of £2k. But with screen mounted ones will do a full postcode search for less than 5% of that price it’s not surprising people are filling their boots. 

It’s fine to blunder about the countryside wafting from hedgerow to hedgerow till the fat lady tells you to turn right, but in the frenzied environment that is London, especially in rush hour, waiting for a voice or judging which actual turning the flipping thing is talking about can really irritate the long tail behind you. 

But that all pales into insignificance next to the single most bone headed response most people have to using their latest must have gadget which is to stick it right in the middle of the driver’s part of the windscreen. Right in the bit of the screen you actually have to look through to see where you’re going when you’re driving. I promise you, take a look next time you’re driving at where these things are mounted. It’s possible that for many who practice this form of motorized madness they’re missing at least 10% of what they should be seeing and often it’s more. 

For the majority of people who drive the worst this can cause is a dent here or there, unless, like me, you ride a motorbike. For us and many cyclists this sort of probably illegal stupidity could mean something far more serious, and having seen three close shaves in the last week it’s something that needs to be thought about. 

Come on plod, start pulling a few people over and reading them the riot act and let’s see if common sense can prevail.

But the amount of hot air being expelled gives the lie to how important a question it is. Of all the retrospective stats issued you can be sure that the house price indices are as closely watched by the Prime Minister as they are by any person in the street. Since the Tony and Gordon show has been running it’s been the warm  feeling of accumulating wealth via the value of your house that’s been closest to any voter’s heart and voting slip and not the myriad number of other earnestly gestated and awkwardly born policies. This may be a sad post Maggie misinterpretation of our net wealth, but it seems to be the way people are thinking.

It was a gutsy (if wrong) decision to ever start tinkering with Stamp Duty and I reckon the delicate balance has now been forever altered with volumes off a cliff and it now being cheaper to add an extension (built by Eastern European builders sending the money home) than move. Only by putting Stamp Duty back to 1% can we actually expect to see volumes rising, and people voting for whoever says they’ll do it. 

It’s easy to see why London house prices have taken off again and it’s easy to see that at some point they’ll slow down again, probably when interest rates rise, but the fact is you simply can’t underestimate the spring in people’s step. It’s almost possible in a casual moment to forget the last two years ever happened. 

There are many laudable cries about first time buyers and hundreds of vested interest groups leaping up and down demanding attention, but the fact is there are not enough houses for people to inhabit here and far too many people wanting to live in them, and that’s become, rightly, a political issue. 

Let’s hope politicians of whatever hue remember where the engine that drives so much consumer confidence is located.

Sales

The big story last year was lack of property, both for Sales and for Lettings. The fact that we had less property available, month after month and demand did not waver for a second, it was inevitable that prices continued to rise all year and in some cases had recovered all the loses inflicted since the fall of Lehman Brothers in 2008.  Now for the first time since we entered recession, we are seeing our first noticeable change in the market. 

Douglas & Gordon did 25% more valuations than they did last January, but of more interest is the fact that we actually took on 70% more instructions than January 2009.  Not only that, we actually took on the highest number of instructions in a month since March 2008, two years ago.  The fact that the percentage increase in instructions is so much higher than the increase in valuations can either be that vendors are simply keener to sell now than they were previously or there is a slight possibility that since being awarded the top estate agency in the UK our success rate in valuations is higher than before.  I don’t think this is the reason, but it will be interesting to see if other estate agents are seeing the increase in instructions that we are.  So having seen our number of properties available for sale falling, month after month throughout 2009 we are now, for the first time, seeing them increasing. Despite agreeing a high number of sales in January, we still have 20% more properties to sell than we did at the beginning of the month.

The level of applicants looking to buy remains very high.  Douglas & Gordon registered 42% more applicants than they did last January, in fact we registered the most number of applicants since January 2007 when we were incredibly busy and registered 50% more than even this January.  So the number of properties available for sale is still low, but at last increasing, and the demand to buy seems to be as high as ever, meaning that prices will continue to increase. But if the increase in property available continues over February and March then the rate of increase in prices will begin to slow.

Lettings

As regards the lettings market, the opposite is true, as is so often the case.  Although the Sales and Lettings market unusually mirrored themselves for most of last year, now the lack of property in Lettings is becoming almost critical.  Douglas & Gordon have fewer properties available to let than I can remember.  October 2006 and October 2007 are the only times we came close to having this little stock and that is traditionally the time of year when we always have least property, after the busy summer months, not January when stock levels are normally very high. 

One of the main reasons for this shift in property is that landlords, particularly ‘accidental landlords’, are now deciding this is the time to sell, so when tenancies come to an end they are now going to the sales market, which is depleting our stocks still further.  Despite this lack of property demand is still extremely high; in fact we registered more applicants looking to rent in January than at anytime in our history and 36% more than this time last January.  It goes without saying that rents are going to be increasing!

So a very interesting start to the year and it will be fascinating to see what happens in February.  The early indications are that the Sales market will continue to be active and Lettings will get quieter.  All those estate agents who moved their Sales teams into Lettings for the last two years, had better think about moving them back again.

Sarah has obvious charisma and appeal and it’s all too easy to denigrate agents and jump on the bandwagon. I wish her all the best with her site which is well thought out, slick and deserves to carve out a niche for itself. Private sales are not new and have in the past been the preserve of the bargain hunter, either buyer looking to buy without competition, or seller trying to avoid paying an estate agency a fee. 

The common link here is “bargain”.

 Just for a minute picture a future with out estate agents. When your heart has slowed down from the sheer excitement of it try to imagine how you, as a seller, might work out how much your property is worth. In the absence of estate agents you’ll look, like your mortgage valuer, at historical perspective and eventually opt for a figure, for without professionals (bear with me here) how are you going to gauge where the market is. If you choose to simply believe what you read in the newspapers you’ll probably get it wrong. If there’s ever been a country with a multitude of different micro markets this is it. If you want an example of how difficult it is to assess value try using a blunt tool like zoopla.co.uk. 

As sellers, and this is true of the majority of Brits, we are NOT all consummate salespeople and if we set a price [remember in this scenario without agents it’s a backwards looking price] the chances are we’ll accept the first offer at that price and then stop showing it. This has all sorts of issues insofar as almost 40% of all deals fall through, but ignore that for a moment and look at the bigger picture. 

This Country has become strong and vibrant to some extent off the back of a vibrant housing market. The reason for this is because any property being sold is valued forward. A professional estate agent will assess conditions, number of buyers and trends and will see how far he can push the value in order to do the best for the seller. This has worked for many years and because we’re a nation that enjoys welcoming foreigners it’s an international market too, so there are many factors to consider. Not only will a good agent have a significant list of buyers and value forward, but they’ll assess bids as they come in, qualify buyers and determine whether they’re time wasters as so many are.  But most importantly they’ll decide if a property needs to go to best bids thereby increasing the potential for upside for the seller, who is the one paying for the service. In other words the property will be sold ultimately for the market value, not to the first person that offers an abitrary asking price.

 All the above add value, clearly and demonstrably. 

The idea of saving money always appeals and is particularly meaningful in a difficult economic environment such as we have at the moment so it should be remembered that estate agents are in a service industry and that our fees are always negotiable. Negotiable doesn’t always mean lower by the way, incentivised fees so the owner and the agent win at a higher price, and share the pain if it’s lower, are always worth considering. 

If the British public have had so many problems negotiating fees down, and we are currently the cheapest Country in which to sell property in the developed world, so let’s not run away with ourselves, you have to wonder how they’re going to get on negotiating the sale price of their biggest asset face to face with a buyer. The idea of anyone seriously considering selling their property without professional advice is ludicrous, and moreover I’m guessing that anyone currently selling on a private website has arrived at their price by first asking the opinion of local agents.

Something must be done. I know the reason they have gone up, because a large majority of agents, particularly those new to lettings and with no experience of settling end of tenancy claims are now just forwarding every claim they have to the TDS and funnily enough TDS can`t cope. Maybe they should have thought about this when they launched the scheme! (why is everyone so incompetent, it beggars belief).

Because D&G have been letting property in Central London for over 50 years we are `amazingly ` able to resolve most disputes ourselves and don`t use TDS that much……… in fact based on claims we made last year and TDS` new rates every referral we make to them costs £1,297.

That`s not a misprint. These new costs are scandalous it will cost D&G £36,337 pa, to put that into perspective our annual cost to be a member of The Ombudsman is £2,200. No,that`s not a misprint either.

And to make matters even worse because TDS is so abused by inexperienced agents the service we receive for our £36,337 is nothing short of laughable, months for a case to be resolved if at all.

Just a thought, but maybe agents should pay based on how often they use the scheme……….it`s not rocket science!”

As an agent myself it pays little dividend to denigrate others in the industry and it is interesting to look at the way some agents keep people, and money, coming back to their businesses over and over again. There is a well known agency in London who have shrewdly built market share over the last 20 years with a sales pitch and modus operandi that has left the established agents envious and angry in equal measure. But they have a drawback; once they have your telephone number they have you for life, and not necessarily in a helpful way. This kind of agent uses a large call centre to hustle hundreds of people on their database every day to ask whether they want to buy, sell, rent, let or any other discipline you care to mention. Laudable, the commercially minded might say, but a pain in the a**e if you happen to have handed your lifetime mobile number to them. For many one experience is enough to shy away for ever, but it’s not that easy and it’s why I strongly suggest that if you ever deal with such an agent you invest in a one time only pay as you go mobile to use purely for communication with them and avoid giving any other details at all. When you’ve finished the transaction, bin it.  If you’re the kind of person that ticks the no marketing material please box you might just avoid this most pervasive and invasive of all “junk mail”.