Market Comment

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16 October 2009

They grow up so fast...

As our parliamentarians return from their summer break we are reminded that autumn is well progressed and as such we are in the prime trading period of the housing market.  So far this season there have been a number of positive, or less negative than expected, indicators emerging from the economy and property market giving grounds for optimism; so much so that with the announcements by some US bank's Q3 profits and bonus funds, MPs are being pressured to find time between repaying their own expenses to ensure that there is no return to an unethical and exploitative expenses bonus culture.

However as the child of cyclical economics we have come to know as the credit crunch is now over two years old, is it time to put teething problems and sleepless nights behind us or should we still be worried about economic sharp edges and brace ourselves for the tantrums and tribulations of the terrible twos?

Seasonally Strong

For our part, our sense of positivism has been rooted in the sales performance achieved over the spring and summer months and the fact we have placed £76m of property in the three months from July to September. The improvement in sales that came with the spring market has lasted well with a less severe seasonal downturn than in previous years and, in contrast to the previous two years, the autumn market this year has outperformed spring trading. This strong performance has also seen a year on year improvement in trading volumes during July and August. The majority of this trading has been grounded in quality stone built properties in the £300k to £700k bracket. 

A further upshot of this activity has been the robustness of asking prices in the current market as competition for quality has led to prices in line with the home report valuations being achieved and in some cases exceeded as the graph above showing average premiums achieved illustrates. 

Our positive experience of the autumn market is also reflected by the regional indices which show a doubling in sales volumes in Edinburgh from the start of the year and an 85% increase in Glasgow transactions during the same period.

New Build

Another sector of the market which has seen mixed improvement nationally is the new build sector, according to figures released by the NHBC. They have cited a modest 4% upturn in applications to start new homes compared with a year ago and a 2.5% increase on the previous rolling quarter. With the new build sector being acutely affected by market conditions any upturn in productivity is a positive sign that builders have consolidated their financial positions and are re-engaging with the market in the belief that there is demand for product moving foward.

This said, figure for Scotland are slightly less encouraging with new homes registered still down 20% on a year ago with just over 1,500 units being registered in the past rolling quarter. This statistics is a marked change from the construction peak a couple of years ago where applications to start in Scotland were in excess of 5,000 units per quarter. However, the Scottish market often lags behind UK trends so any national upturn is potentially a more positive indicator for future Scottish performance.

Stability

While, after two years of difficult conditions, there may be temptation to herald the consistent month on month improvements in sales volumes and prices as the 'end of the beginning', but there still remain some fundamental issues that are undermining 'normal' market performance. Issues regarding affordability, lending and economic recovery are all still present and will be influential in market performance in the immediate future.

The delicacy of current conditions can be illustrated by the contrast between the positive announcement that the rate of unemployment is slower than expected, balanced against the today's negative announcement regarding the Halifax Estate Agency sell off by Lloyds and the associated job loses. It should also be noted that positives in current conditions can often be better characterised as events that are less bad than had been expected. So while Google and US banks are announcing billion dollar profits, it is worth bearing in mind that 666 companies in the UK have be taken into administration in the third quarter of 2009 according to Deloitte; the positive to take from this is that it is 6% down on 2008 and seems to be slowing in pace.

For the housing market the positive news of improving volumes and values should be set against the low levels of supply that are supporting prices and the potential influence that pent up demand is having at the moment. The obvious concern with this influence is that it is likely to have a limited duration; the latest RICS housing market survey point to this factor of demand outstripping supply. An important development for future market performance will be how we transition from a period of pent up demand into a more sustainable market dynamic based on mass participation.

While it can be easy to get caught up in the figures and headlines, both positive and negative, what we take from our hands on experience of the autumn market is the real return in buying appetite based on general principles of improved stability and the motivations of real life circumstances which are persuading buyers back to the market. While we should not fool ourselves into thinking that we are on the cusp of imminent return to 'normal' market conditions what is clear is the uncertainty that paralysed the market for so long has subsided meaning that for many their need outweighs their concerns and with market conditions becoming less volatile common ground can increasingly be found between willing buyers and willing sellers. 

When statistics really mean something...

We all know that statistics can be misleading at times, however, sometimes they illustrate stark facts.

One in three people develop cancer in their lifetimes and one in three people over 65 die with dementia, of which Alzheimer's is the most common form.

With this in mind and with charitable giving in Scotland reportedly down 8% year on year Rettie & Co. will be co-sponsoring the Lennoxlove House Fashion Show in aid of Marie Curie and Alzheimer's Scotland on Sunday 22nd November.

With tickets only £25, of which the full amount goes to charity, for a heady combination of fashion, whisky and wine there can be few more enjoyable ways of supporting such a worthy cause; if the likes of Ranulph Fiennes can climb Everest in his 60s to support Marie Curie, then having a few drams and enjoying a fashion show seems like a highly more enjoyable way of doing the same thing.

For further information or to book your ticket please click  in the banner below.

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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