One of the joys of going on holiday is that I can escape the barrage of information on London property that I sift through every day. And trust me there are an awful lot of statistics, articles and opinions spewed forth every day. Some of it is enlightening while much of it is simply wrong or misleading.
I have just read an article in a major paper which hails the start of a great crash in London house prices. There is nothing wrong with stating this opinion if you can back it up with strong figures and sensible thinking. Obviously no-one can know the future – except for the fact that we will die and pay an annoying amount of tax before we do so – but we can look at the probability outcomes.
For example, I think the price of the standard, narrow London townhouse is likely to underperform apartments and certain types of house. The reasoning behind this is that the classic townhouse is predominantly owned by my parents’ generation. They are becoming less enamored with walking up 5 or 6 flights of stairs, so more of these properties will start coming to the market.
Conversely, my generation (as a whole) cannot afford these houses while international buyers don’t understand the British predeliction for stairs and prefer houses with lifts or apartments.
Therefore we will see rising supply but muted demand so it is likely that this type of property will underperform apartments and may well fall in value. However, a fall in value is not guaranteed because the gulf in price between apartments and townhouses may push people towards buying the house.
I expect a similar issue with houses in the country, again due to demographics. There was a distinct shift 40-50 years ago from cities to the countryside as my parents’ generation sought larger homes with gardens so that brats like me could hoof footballs as far as I like and smack cricket balls in every direction without destroying the neighbors’ homes. In the last few years this trend has reversed as households have declined in size, people marry later and the best jobs are concentrated in the big cities.
This is my basic theory and if you would like to know more about it then please make contact for a more in depth decision. The article that I mentioned at the start unfortunately, hinged on one fact: that asking prices in London have dropped nearly 6% in two months according to Rightmove.
As I have pointed out before, asking prices should be taken with a pinch of salt and largely ignored. They are often inflated especially when there is a shortage of properties; the agents, desperate to win the instruction for the property, often overvalue as they are very poor at differentiating themselves from the other agents. Therefore they fight on price- both their fees and the property valuation.
Consequently when the mood of the market changes asking prices tend to fall more precipitously than prices. And the mood has definitely changed over the past three months, which has been great as I have been able to negotiate some excellent prices for clients. However, to suggest that a fall in asking prices is beginning of a crash is too simplistic and misleading.
For example, if the properties that have seen price reductions of 6% were initially 15% overvalued then they are still overvalued. What percentage of these properties is still overvalued? How many of the properties that are currently selling are selling for the same or higher prices than three months ago? Are the price changes the same in every area of London? Which type of properties is seeing the greatest price falls? Which are still outperforming?
There are so many questions that have not even been asked by the journalist that it actually reveals the main point of the article: to attract the readers’ attention and get them to buy the newspaper. Because bad news especially (bad) news on house prices sells newspapers. Not all articles are this feeble but an unfortunate number are.