The Sunday Times
No more waiting for Brexit. So says Noshaba Khan, who first thought about selling her six-bedroom townhouse in Stoke-on-Trent back in 2016. After the referendum, she and her husband, Burhan, got “the Brexit jitters” and put their plans on hold — they want to move down to Bristol so their children can grow up near their cousins.
The 2017 election came and went, then the March 29 exit date, and still they waited. Then came the final straw: May’s resignation. “At every milestone, there has been uncertainty,” Khan says. “It’s like watching a pot boil — it’s taking for ever. Not knowing when or if Brexit will occur, we decided we must move forward with our lives. Otherwise we could still be here in two years, waiting.”
Khan, a portfolio manager, has taken the plunge, putting their home on sale for £245,000 (01782 626522, hunters.com), and wants to have found a buyer by October 31. They had three valuations, one as high as £270,000.
“A lot of people want to hear big figures. My husband and I are realistic. We said to agents, ‘Don’t sugar-coat it. What have similar houses nearby sold for since March?’ Then we said, ‘Let’s go slightly under.’ We want to be competitive, to get interest and footfall. The worst thing is to go on the market and reduce constantly. It leaves a bad impression. We’re confident it will sell.”
Few can say that in London, which shows the topsy-turvy state of the housing market. Alex Johnston has reluctantly cut the price of his townhouse in Maida Vale, west London, after three years with no offers. The app developer and his wife, Julia, put the five-bedroom home on the market for £3.25m in 2016, but have cut the price to £2.749m and brought in a second agency, Arlington Residential (020 7722 3322, arlingtonresidential.com).
“We’ve had 25 viewings this year,” says Johnston, 55, who wants to downsize. “It’s a good excuse to clean the house, but I never expect it will end up in an offer.”
He says he’s a motivated seller, but not a desperate one. “Buyers see Brexit as an opportunity and want the best deal they can get. But this is my biggest asset. If I can ride out a market storm, I should. To sell it at a low point would make me feel foolish and as if I’d left a lot of value on the table. I feel I’ve reduced the price by a reasonable amount.”
Hot and cold markets
Johnston has his work cut out. Prices in the capital fell by 4.4% in the year to May, the biggest drop in a decade, according to the Office for National Statistics (ONS). And his Maida Vale postcode, London W9, is “very cold”, according to PropCast, an online tool that takes the temperature of local property markets so vendors can see if buyers or sellers have the upper hand. Only 89 of the 574 properties for sale in W9 are under offer — less than 16%.
By contrast, the Khans’ neighbourhood, Cobridge, in Stoke, is “very hot” — in ST6, 308 of the 563 properties for sale are under offer (55%). The country’s hottest market of all, though, is BS3, in Bristol. South of the river, it includes the artsy Southville area, once jokingly nicknamed Lower Clifton, but now rapidly gentrifying — 71% of 415 properties are under offer. The coldest is in London: in WC2, which takes in Covent Garden and Holborn, only 8% of 248 homes are under offer.
“There is no one market right now, there are thousands of markets,” says Gavin Brazg, founder of The Advisory, a sellers’ service that runs the PropCast tool. “If you’re in a hot market and you’ve not had an offer in 30 days, something is wrong — your price or your agent. In a cold market, if you’re not getting any interest and there are eight other houses like yours, make sure yours is the cheapest.”
Many vendors are blaming Brexit for a lack of interest and being complacent, says Brazg, who buys and sells about 150 properties a year on behalf of housebuilders to prevent chains and delays. “A lot of people say, ‘I’ll just stay on the market, because when Brexit is sorted, it’s all going to pick up.’ But my advice is, get out now. If there is no deal, it’s going down. A hard Brexit will hurt us really badly.
“In a falling market, the smart person sells now, not later. The winners will be those brave enough to take the first cut. Everyone else will be playing the game of a thousand incremental reductions.”
PropCast has for the first time issued “price-drop warnings”, based on a fall in buyer demand in certain postcodes in the month from June to July. Top of the drops is GU28: Petworth, West Sussex, a bucolic area on the edge of the South Downs National Park, two hours from London. It has seen a 12% drop in demand in one month, while the national average was a 1% rise.
The rural buying agent Jess Simpson, who deals with properties above £2m, reckons the market in GU28 may have overheated. “It’s become very aspirational and expensive,” she says. “Many homes have been redeveloped into huge country houses. But it doesn’t appeal to international buyers who are benefiting from the weak pound. And the rush to leave the capital is slowing — the consensus is, ‘The London market is bottoming out, so let’s stay here.’ Bankers feel bearish due to Brexit. They say, ‘Let’s wait a year to buy that big house in the country.’”
The false market
Overvaluing is paralysing the market, Simpson adds — especially with housing stock at record lows, according to last week’s RICS Residential Market Survey. “Agents are overvaluing by 20% — they’re desperate to get the instruction and to be seen to have properties on their books. Six out of 10 houses I see are overvalued. It’s a false market.
“We’re going to see a correction come October and November. Reality will set in once Brexit happens. Prices are going to have to drop because of the potential of what’s going to happen. We’re not in a recession now, but do vendors want to wait for that before they sell? If they’re sensible on price, they can sell before October.”
Sell before Brexit
Even if the new prime minister secures a new deal before October 31, or the sky doesn’t fall following a hard Brexit, vendors are still in danger, warns Tim Dansie, director at Jackson-Stops estate agency in Ipswich. “A lot of sellers are waiting for October 31, then they’re all going to be coming to the market at the same time. That will mean oversupply — their prices will be dented. Better to sell now to beat the rush.” He was frustrated by Boris Johnson’s recent pledge to slash stamp duty, as some buyers are now waiting. But then Johnson floated the idea of vendors paying it instead — another reason to sell now.
It might also be time to switch agents. Dansie says it’s now the norm for second agents to make the sale, after the first one fails to sell at an inflated price. “We’ve been the third agent on several deals. We recently pitched for a Georgian house in Suffolk. Our rival got it for £2.1m. It hung around for months. The second agent tried to sell at £1.95m, but the damage had been done. As the third agent, we put it on at £1.75m and sold it for £1.65m. If it had gone on at £1.75m to start with, they’d have got it.”
For this reason, Dansie says many vendors are selling off market so as not to leave a digital footprint and the stench of failure if a property sits around and drops in price. Invisible Homes, a new “off market agency” in west London, refuses to put its properties on portals for that reason, instead matchmaking sellers and buyers discreetly by email;it has seen a 230% rise in instructions in six months.
Brazg recently advised a banker whose Norfolk pile failed to sell after 12 weeks at £950,000. The banker set up an off-market competition with seven agents, offering the winner a 4% fee: he sold within 10 days for £850,000.
Where to buy now
The buyers are out there. Last week, in the RICS survey, a net balance of 10% of agents reported a rise in new inquiries, the first time this has occurred since November 2016. In the northwest, prices are up 3.4% in a year, according to the ONS.
PropCast has also issued price-rise alerts in 10 postcodes where there has been a spike in demand from June to July. Topping the charts was KT7, which takes in Thames Ditton, a pretty riverside village in the Surrey commuter belt. Demand there soared by 12% in a month. “River locations prosper when the weather gets finer,” says Karl Matier, head of Savills estate agency in Esher, who also attributes its rise to upsizing London families. “Just under 50% of our buyers are moving from Wandsworth, Putney, Clapham and Wimbledon.”
Edmonton, a gritty area in north London, shows there is life in the capital: PropCast reports a 9% surge in demand in the N18 postcode. But hot markets will turn cold under a no-deal scenario or a Corbyn government, Brazg believes.
Hard Brexit scenario
Everyone is worried about the B-word, but Andrew Goodwin, chief economist at Oxford Economics, thinks it might not be armageddon. “Our baseline forecast assumes we get to September, then the new prime minister doesn’t want to fight an election, plays for time and there’s another extension,” he says. “The uncertainty continues. No change in interest rates. Sluggish economic growth. The same market as now. Transaction levels low, prices going nowhere.”
Goodwin can’t see a mass rush to sell, then oversupply, as most people can’t afford to move. He has also war-gamed a no-deal scenario. “We have prices falling by 2% over the next couple of years, so not a steep crash. The economy would slow to a halt, but the Bank of England would cut interest rates to offset that. It’s still a low-transaction market. You only get a big correction if people are forced to sell due to a big increase in unemployment or interest rates. We don’t see either happening.”
The same goes for a Corbyn government, he says. In the worst case, if it interferes with the Bank’s independence, markets will take fright and the economy will suffer, but fiscal stimulus will prevent a big housing crash. So the sluggish market will endure — and the waiting game will go on.