Winkworth Notting Hill Newsletter

January 1st, 2009

Notting Hill Market Comment

By Alex Thompson, Director of Winkworth Notting Hill.

Cautious Optimism for 2009

I am sure I was not alone in being pleased to see the end of 2008, a very difficult year for sellers in Notting Hill,where prices continued to fall and numbers of transactions dropped to unprecedented levels. The million dollar question is of course,will 2009 be any better? Well in general economic terms, there is little doubt that more difficult times are ahead, but there is strong argument to say that the Notting Hill sales market is likely to recover sooner than the broader economic climate might suggest.

Ahead of the Curve

• The Nationwide and Halifax 2008 Reviews state prices fell nationally, on average, by 15.9% and 16.2% respectively, during the year. Notting Hill prices fell well above this average at closer to 20%.
• The general consensus seems to be that prices will fall up to 30% from peak to trough. Notting Hill already has – some transactions we have seen reflect an adjustment well in excess of this level.

These two points illustrate the speed with which prices here reacted – more or less immediately as the Credit Crunch took hold September 2007. This price sensitivity was driven by the precarious levels that prices had reached and by the very nature of the Notting Hill City buyers – those either effected personally by the uncertainty or by their being definitively investment-conscious people. It is this speed of reaction and the rate at which prices have fallen from which they will now benefit, bringing about an earlier recovery than many other areas. After 16 months of price falls it is certainly fair to assume that we are through the worst of it.

Latent demand

As price expectations continued to be negative during 2008 and provided little incentive for buyers to commit, transactions levels fell at an unprecedented rate, as the graph below shows. A great number of those who would normally have bought have been keeping track of the market and were indeed registering with us towards the end of 2008 – not quite

ready to buy, but monitoring values and assessing timing. As this latent demand views prices to be reaching their bottom, transaction levels will inevitably begin to recover. There are also those who might have felt they had ‘missed the boat’ as prices soared previously for whom the correction has now levelled the playing field. Add to this speculative investors and you have quite a stock of pent-up demand waiting to step back in and as buyers do begin to recommit there will be a sense of self-perpetuation to the recovery in transaction numbers.

Over the Christmas period and coming into the first weeks of the year we have already seen encouraging evidence of people returning to the market. Indeed in the first week we received more offers than in any one week of 2008 and had six buyers competing for one property which was agreed following best and final bids. Buyers are beginning to realise that this is the best opportunity that they have had for quite some time – there is real value reflected in the market, a reasonable selection of properties to choose from, a more settled environment within which to buy and for those who are looking for financing and can meet the higher deposit requirements, increasingly favourable lending rates. Property once again looks like an excellent medium to long term investment and will also stand to benefit from some loss of faith in alternative investments.

International Buyers

One common factor we have already seen and expect to be prevalent during 2009 is a higher number of international buyers. Notting Hill has always been of great appeal to buyers from all over the world, but with sterling’s depreciation relative to other currencies, the benefits of the market movements have been greatly amplified. We have already seen a number of European buyers entering the market, buyers for whom the Euro’s relative strength has more or less doubled the benefits of the price falls.

Bank Lending

The significant reduction in lending of 2008 had a major effect on the market and even the dramatic steps taken by the MPC in slashing interest rates did not have the impact many had hoped for. There are signs now that this is starting to change with increasingly attractive rates being offered to those with higher deposits. There are a small number of lenders offering at 90% levels but these tend to be with much higher rates. If buyers have 20% deposit or more and can satisfy the more stringent qualifications than in the past, they are increasingly able to secure deals which on a historic basis, look extremely attractive; indeed fixed rates sub 4% look not too far away.

Supply

There was a reasonable amount of supply to the market during 2008, but with such high equity content in Notting Hill there was no real surge of panic selling. As buyers are returning to the market supply appears to still be sluggish which will assist in slowing the price falls. Whilst vendors had a very difficult experience in 2008, things look set to improve for them this year. Prices may well have a little further to fall but with buyers in less of a firm minority, they will be less able to negotiate so hard and properties will once again sell more quickly and closer to their asking prices. For sellers it is very much becoming the right time to take action. Timing has been a critical factor in the market of late and whilst there is still not a huge amount of stock on the market,much like with buyers, there is significant pent up supply. With the New Year bringing a more optimistic feel to the Notting Hill property market, the first half of the year is looking far more promising. Prices will start to slow in their descent but it would be unrealistic to expect them to bounce back with any vigour – they are more likely to remain much more stable in the short to medium term.

For a free no obligation market appraisal for either Sales or Lettings, please contact our office on 020 7727 3227, alternatively email: nottinghill@winkworth.co.uk.

Lettings

The lettings market forms a natural hedge to sales in terms of activity and 2008 was true to form with the sales uncertainty contributing towards record numbers of properties being let. After earlier price increases, supply gained the upper hand in the second half of the year and prices settled a little lower on the year.

Coming into 2009 we have more than twice the number of available properties we would normally expect,with levels bolstered by would-be sales properties and by tenants serving notice due to changing personal circumstances. Both personal and market uncertainty will continue to provide support and demand will remain strong during the year, but with such high levels of supply realistic pricing is critical, as is using any void periods to keep your property looking its best.

One point in the market where things might be a little different is the upper end. Whilst last year rental prices of larger properties fell significantly with increased supply and far fewer corporate tenants, demand at this level has been noticeably higher already, leaving us short of larger flats and houses. This may well bring about a recovery in prices at the top end.

HIP Update

HIPs (Home Information Packs) were introduced in 2007 with the aimof giving buyersmore information about properties and tomake the process of buying and selling faster andmore transparent. On December 8 2008, the RT HonMargaret Beckett, new HousingMinister, announced the following newmeasures that will be introduced on April 6, 2009.

First DayMarketing

FromApril 6, 2009 the HIPmust be available fromday one ofmarketing the property. However, certain informationmay still be left out providing it will be available within 28 days – this will usually apply to the local searches.

Expanding HIP content

HIPs will have to contain an additional document, the Property Information Questionnaire (PIQ). This will give buyersmore useful information about a property to enable future owners tomake an informed decision before viewing a property.

Better Service

The Office of Fair Trading,with the support of the Government, plan to conduct a survey of home buying and selling, looking at competition between service providers (e.g.mortgage providers, estate agents etc…), to monitor how well consumer interests are served.

Posted in UK Market Comment, UK Newsletters, Winkworth Office News

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