Nick Churton of Mayfair Office 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 shortsighted 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.