Perils of Predicting Politics and Property...
Tuesday 6th September 2022
Congratulations to Liz Truss.
Now comes the hard work to lower tax rates, smooth supply chains and boost our economy in the face of horrendous fuel costs and high inflation caused by that piratical puffer fish - Putin.
If you can do this, I predict you could even win the next election. You have 2 ½ years. Good luck.
After all, who in their right mind wants a Labour/SNP coalition?
Back in December 2021, using our Christmas e-card, I stuck my neck out and predicted the prime central London property values would finally begin to rise in 2022.
We have passed the half-year point now. Was I right?
Well. Yes and No.
It is supremely hard to see accurately what is going on in the market when there are so many vested interests trying to spin ‘statistics’ for their own agendas and trading volumes are still so thin.
The PR teams of the big estate agency firms are particular culprits of overly optimistic releases. Stories really.
The Stats Within The Stories
Rightmove and Zoopla data can be useful as early indicators but are not a record of actual transactions.
The building society and bank survey statistics are totally useless when assessing the Central London market which is a separate asset-class in itself.
Whilst retrospective, Land Registry statistics are helpful, though squiffy in Central London where so many properties are owned in offshore companies. The shares can be traded without any record at Land Registry. That scenario is changing under new rules around registering UBO’s - a topic for another PPP blog.
For Central London, only www.lonres.com has good market statistics. However, even their data is limited, as it is supplied by those agents who subscribe to it and largely where the property was publicly marketed.
Crystal Ball Clarity
In the round to date in 2022, it looks like house prices have held their values or risen by a few percentage points and transaction volumes have been a bit higher. Prices of flats seem to have sagged a little since January and trading is pretty thin.
Lovely examples will always sell well and tend, if anything, to have gone up in value.
It is hard to ever have high trading volumes when SDLT and CGT prevent a fluid market.
Another topic for Liz’s inbox…..
Future Forecasts
Which brings me to my thoughts for the rest of the year-
We are under a tsunami of dire press predictions about the prospects for the UK property market in today’s environment of rocketing interest rate.
This is understandable - they want to sell papers or topple the Govt and fear aids both of these purposes.
Out of London property prices shot up (sometimes as much as 50%) during the two years of Corona Chaos. My friends in country agencies tell me that special properties which particularly appeal to cash buyers leaving the capital are sustaining their prices. However, more routine properties, where buyers need mortgages are already seeing price drops.
Storm In A Teacup?
In reality Central London Property prices are much the same now as they were at the last market peak in Q1 2015. In real terms that means they are lower.
I found myself writing exactly this to a nervous but sophisticated buyer – bullet points are my way!
As ever the press cannot do nuance.
> Central London prices have gone sideways since 2015.
> Flats slid a bit further in Corona Chaos, so are a bit lower than houses in relative terms.
> In real terms prices are down since 2015.
> Rentals are extra-ordinarily busy and short of stock, therefore yields are rising. As they always do when interest rates do.
> Developers have paused new builds.
> Prime Central London sellers are rarely forced sellers, especially when rentals are so strong.
> They will likely sit out any possible downturn.
> High SDLT & CGT constricts supply.
> I suspect transaction volumes will drop off (they are already low) and lack of supply will sustain prices.
He has now re-raised the offer he had reduced to a level acceptable to the seller!
I am not a market denier. I just think that central London prices will be sustained, and when inflation does come under control they could rise quickly.
There are no easy answers as to how, but the quickest way to get back to a normal property market is to end Putin’s war in Ukraine.
Until next time,
PB
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