Summer Days

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10 July 2009

With blue skies, sunshine on a Friday afternoon and thoughts drifting to beer gardens, the summer mood has now truly arrived; this is only reinforced by the number of 'out of office' replies rising on a daily basis. As the property market returns to its seasonal cycle, buyers and property professionals alike are more likely to be reclining by the pool this month than checking email alerts and the property papers, and to be honest who can blame them, it has been an arduous year so far.

For the energetic few who have left the sun loungers behind and are venturing out on a quest for authenticity and opportunity, what local knowledge can we impart to answer the real questions on these courageous travellers mind? Questions like; how many camels is a fair price for my girlfriend? Is that a real Philippe Patek? And just because a man calls himself captain and his felluca has been given the moniker HMS, is that actually a better choice than the local ferry?

Home Reports

Since their inception Home Reports have been a topic of contention as to whether they help or hinder the market. Strong cases has been made by both sides, but from an agents point of view the Home Report has added a level of certainty to an uncertain world and provided a starting point for discussions.

While there have been some issues to contend with, such as valuations not being accepted by lenders and many buyers opting to survey themselves due to the complexity of a purchase or a lack of report detail, the provision of an independent value has gone someway to allowing transaction to occur.

This independent valuation lies at heart of the home reports utility and its accuracy has been something we have been monitoring with interest. In a falling changing market the ability to place an accurate value onto a commodity requires a great deal of knowledge, skill, experience and information ; unfortunately it is not quite as simple as googling house price sales (or maybe fortunately in my case as a researcher).

With this complexity in mind we have been monitoring the initial home report value for properties we have sold and comparing them to the actual sale price achieved (see table below).

These figure can be read in one of two ways; either as a measure of the accuracy for the original valuation by the surveyor, or as an indicator of the market dynamics.

If we choose the later it shows that in many cases the buyer is still benefitting from suppressed market conditions and is able to negotiate a price below what has been deemed to be the fair market value in current conditions. 

On the flip side of this there is also a strong proportion of sales that are achieving values in excess of the home report value. Properties that have exceeded the home report valuations have tended to be classically desirable properties, often stone built, in traditionally desirable areas. These properties have garnered strong interest, despite current buyer reticence, and have resulted in competitive closing dates.

For buyers and sellers alike it is clear that good quality property has found traction within the market place as those unfettered by the chains of lending have recognised the inherent value of quality.

Mortgage News

With mortgage lending being such a major factor in the housing market, there have been some interesting developments emerging recently.

Nationwide have announced a 125% LTV mortgage for existing customers who are currently trapped in negative equity but want to move house. This move is considered controversial although other lenders are now considering similar schemes. This type of mortage product may well be outlawed if restrictions based on LTV are introduced.
Research published by the Council of Mortgage Lenders has suggested that 80% of first time buyers under 30 years old are now relying on some form of parental contribution; this is reportedly double the 2006 levels.
A survey by the National Association of Estate Agents has found that 22.5% of people were finding that the lending criteria of banks and building societies were preventing them from buying a house. Also in this survey over half surveyed said that depository requirement would have to be lessened to enable them to move home.
Figures from the Bank of England have suggested that mortgage rates are rising. The average rate on a two-year fixed-rate loan with a 75% LTV in June rose to 4.47 per cent from 3.98 per cent in May. 

Lies, damn lies and sporting statistical miscalculations

Following some research published from this office a couple of weeks ago, the semi-final defeat of Andy Murray at Wimbledon may have given some cause for housing market concern. However, this researcher has to admit to an error in his methodology as he failed to account for the 'Federer complexity' which in a similar way to the 'Sampras Paradigm' of the 1990s can lead to aberrations within the data. Apologies.  

Contact Us

If you have any questions, would like any further information regarding the above content or would like to discuss how the Rettie & Co. Consultancy & Research Team can help your business, please do not hesitate to contact:

Andrew Meehan
Researcher
t: 0131 624 9051
e: andrew@rettie.co.uk

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