Looking forward to 2011?

Friday, December 24, 2010 by Ed Mead

I think, apart from a minority who specifically deal with people who are so rich that, unlike Stuart Baggs they really are a Brand, most of us will be glad to see the back of 2010.

For the doom mongers it’s been an irritating year as prices have held up, but it does hold the promise of salvation for them…..or does it.

2010 saw, in London anyway, the somewhat counter intuitive and unusual phenomenon of supply shortages doing the work that demand usually does. This has created what many out there would call a stable market, ie prices are roughly level, but what I would call a pain. No one’s moving, and with nowhere to buy, uncertain times ahead and mortgage repayments so low for so long it’s easy to imaging one’s living in a parallel universe and that this will stretch on into infinity.

When was the last time you heard an estate agent praying for higher interest rates, probably not ever. But in this case most sellers, and it’s them that matter at the moment, simply can’t be arsed to move as they’re quite comfortable thank you. Yes, Stamp Duty changes due in April might dislodge a few but I’ve never subscribed to the theory that people sell or buy to deadlines that might save them a few thousand when they’re spending hundreds of thousands. So if we saw a needling quarter point on rates many who are feeling very comfortable thank you might suddenly feel the icy fingers of panic spreading. Or in other words they might actually get on and do something.

Those praying for lower prices tend to point to low volumes prefacing a crash but we exist in a new paradigm now where this same low volume is what’s keeping values up. Please don’t forget I’m talking about London here and as for what’s happening in London spreading out to the rest of the country, sadly that connection has gone the way of my BT line. I don’t expect these exceptionally low volumes to stay for long but significantly lower volumes will be a feature of the property market for the next decade, perhaps longer, to the detriment of the macro economy.

Agents are going to have to get used to this and the only way they’re going to survive is to consolidate, so expect there to be some amalgamations in 2011. Those who fought to survive in 2008 will often not survive this second round. Never forget that if agents are bellwethers of the wider economy it would be prescient to avoid schadenfreude.

So for 2010 I think agents, and the wider property owning public have got away with it. As someone who says it as it is I get the genuine feeling that 2011 might buck the trend again and for London at least prices for good property will end the year higher and buyers are, I think, beginning to see that. They’re reckoning that buying early next year might not only be sensible, but would also take advantage of some of the last remaining low mortgage rates which seem to be rapidly drying up.

As for volumes, the real hidden issue over the last four months of 2010, they simply have to improve, and perhaps will the closer the Bank of England get to raising interest rates. A small rise now would do wonders for stirring some who’ve got over complacent out or their torpor.

This article appeared yesterday on on1londonproperty’s website