With an 80 percent increase in clients this year, London property search company, Sourcing Property, is predicting a busy 2010 if demand continues to outstrip supply, interest rates remain low and sterling remains weak.
Jo Eccles, property expert and Director of Sourcing Property says: “The lack of supply, low interest rates and weak sterling, coupled with reports of house price increases, meant that the summer months were unusually busy, with a variety of active clients. These included overseas buyers taking advantage of the weak pound, buyers who suspected that we had reached the bottom of the market and were keen to act before prices rose further, and first time buyers whose parents were lending them money for a cash deposit, rather than leaving their savings in the bank earning minimal interest. Tenants with cash in the bank have also returned to the market, because if borrowing with a large cash deposit, in some cases it’s now cheaper to buy than it is to pay rent each month.
Current prices:
“There is still a shortage of new properties coming onto the market in London and this supply/demand imbalance is keeping prices firm at current levels – approximately 7% below peak prices, and in some cases, buyers are paying peak prices. We’re also seeing a number of properties going to sealed bids. We recently showed one client a two bedroom property in Notting Hill priced at £795,000 which came onto the market for a one hour viewing slot and resulted in two cash buyers going to sealed bids. Both offered more than £50,000 over the asking price - comparatively more than historical peak prices.
The size of a buyer’s deposit is also still key. We recently had a client buying in Hampstead who was deciding whether to put down a 20% or 25% cash deposit – if he only put down 20%, his mortgage repayments increased by £1,000 per month, which demonstrates the impact of deposit size”.
Investment hot spots:
“Over the past four months, we’ve seen a large increase in overseas clients, in particular Middle Eastern, Malaysian and Australian buyers who are taking advantage of the favourable exchange rate. Fulham has been a very popular area for buy to let, as there is good demand from tenants. Investors can usually buy a good two bedroom flat for £500,000 - under the 4% stamp duty threshold and with gross average rental yields of approximately 4.5%”.
Looking ahead:
“There is a lot of conflicting research with regards to the economy and property market; the next 12 months appear quite dependent on interest rates as well as supply levels of new property for sale. If rates stay low and the supply/demand imbalance continues, I suspect the property market will remain buoyant over the next 6 – 12 months.
In the short term, there is a sense of urgency amongst buyers to secure a property before the market quietens down for Christmas, so we’re certainly expecting to remain busy until mid December”.