"To buy or not to buy, that is the question"
Our guest article this month comes from expert property agent Henry Pryor, who focuses on the current state of the London real estate market and where it is heading...
With apologies to the Bard, I wonder, if like many, you are trying to make sense of the housing market? Should you sell, should you buy or is it all just too uncertain to make the commitment? I can't pretend that I know the answer but as a professional buyer I can share my approach and perhaps you can take advantage of my experience and in all probability improve upon them.
Some background - I have been buying and selling residential properties for the past 27 years. I worked for two of the biggest selling brands Savills and Strutt & Parker but for the past decade I have been a buying agent advising clients and working in many cases with the team at Silverman Sherliker. I have worked through two property recessions and I think it is fair to say that I cannot recall a better time to carve a great deal.
Uncertainty undermines all markets. When buyers and sellers are confused they tend to do nothing and wait for clarity. Eighteen months ago the 'value spread' (the gap between what a property might sell for if handled carelessly and what a diligent agent might get) was tight - perhaps less than 10 per cent. Today, thanks to Brexit, the American Presidential election, changes to transaction taxes and the economic and political uncertainty that still buffets the UK following the Credit Crunch in 2008; I think that a poor agent in a hurry might undersell by this amount and a good agent could get a 10 per cent premium. That's a 20 per cent spread.
Whilst yields drive underlying value London property and expensive London property in particular remains attractive to both domestic and international buyers. International buyers have a currency advantage since July last year but I have yet to meet a foolish foreign buyer who does not want to take advantage of the prevailing market conditions too. Whatever your motivations I am still nervous of residential properties that don't offer a six per cent gross yield. There are only two ways to push up the yield - either achieve a higher rent or pay less for it. In the current market I was offering 20 per cent less than 2016 prices and sometimes achieving more.
There are always going to be more people who 'must' sell than buyers who 'must' commit. Death, debt and divorce continue even when the market is soft. With prices in prime central London down by as much as 15 per cent over the past year I am now advising clients to pitch their first bid as much as 30 per cent below the January 2016 figure.
It still isn't easy to agree deals and it can be very hard to make them stick. Almost as soon as something is agreed someone either feels they have paid too much or that they have accepted too little. However, for those trading one house for another if they can get their sale away first and be able to deliver on what might seem a ‘cheeky’ offer, I am finding that many sellers resolve melts like snow in the spring sunshine.
Today, if you search a website like Rightmove.co.uk for one million pound plus properties inside the M25 it will return over twelve thousand. In December, the Land Registry recorded just 365 sales! Sellers and their agents not only welcome viewings like a drowning man eyes a passing pallet, their resolve for their initial asking price can weaken once they understand that unlike last year 2017 is a buyers’ market.
So, if you are buying then make sure you have sold first. Be prepared, get your finances arranged, make sure you have instructed Silverman Sherliker to prepare a file and if in doubt, get some expert advice. Your solicitor will be able to recommend a competent buying agent to help you make the most of this exciting market.
Looking to buy or sell a London property? Contact Henry Pryor:
020 7193 1599