22
Oct
A Long Weight
Andrew Meehan of Keats Grayshott comments on the recent
Government Spending Review and how this may effect the property
market.
Generations of young factory apprentices will remember being
sent to the stores for left-handed screwdrivers, bubbles for spirit
levels, rubber nails, tartan paint, and even a long weight - three
hours later they would still be waiting!
It seems to have been rather a long wait to hear about the
Government’s measures to reduce the fiscal deficit. But now
we know. Some in the property industry may try to make light of
this and even talk the market up. But make no mistake, this is a
major property market event.
There will be cross-market influence. The attitude of lenders -
who are already being difficult towards borrowers – will
become even more demanding, especially in areas of the country that
are most affected by public sector job losses. This will come on
top of mortgage lending at a ten year low.
So where is the silver lining in this rather grey cloud? The
silver lining is in the long term.
The spending cuts will negatively affect social housing and new
home construction in the short to medium term. This combined with
rising rental values will create housing pressure in a growing
population. These are the conditions that, once the economy is
growing again, create a house price boom. While a stable property
market is far more preferable than one that lurches from boom to
bust, the lure of an appreciating property asset means that 2011
could be a vintage year for house-buyers looking to the future.
Certainly buying won’t be that easy with lending as it is.
Nor will selling. So now house sellers must decide if they want a
long wait or a short one before finding a buyer. The length of wait
is, of course, dependent on the price being asked – high
price, long wait: low price, short wait. It is as simple as that.
But they can’t have it both ways – high price, short
wait. Not in this market. Prices are going to be affected and the
big question for sellers is are they going to lead the market or
follow it?
In this market only the leaders will move quickly. They will
understand that they have to be highly competitive with their price
to attract a buyer. But they will know too that they will be in the
driving seat when it comes to getting their next property at a good
price. That is the quid pro quo, the point at which any initial
loss is neutralised. It nearly always works that way. But many
sellers just won’t wait for the last phase. They will want to
buck the trend in the first phase, become rather obsessed with what
they may lose on the swings and fail to appreciate what they might
win on the roundabouts.
So to avoid a frustrating time in the market sellers should
pitch their price to catch the eye and create competition between
purchasers. This is where a savvy seller has a big marketing
advantage over a more short sighted one. Then they will be in a
commanding position with both their sale and purchase and can leave
all the more naive sellers - like those young apprentices - in a
lengthy queue for a long wait.