The number of people looking to buy a house has halved since last year with prices in south west London down 11.1%.
Compared to price rises of 20% in 2006 and 15% in 2007, Ivor Dickinson, managing director of Douglas & Gordon, does not believe the current price falls are altogether a bad thing.
‘If prices had carried on climbing at that rate over the next five years, a one-bedroom flat for £250,000 would cost £625,000 in 2013, which of course, is absurd,’ he says.
Mr Dickinson believes the market has nearly “bottomed out,” and with high levels of stock, this is a fantastic time to buy.
‘We badly needed a correction, even though it is painful. However, with so many houses competing with one another, often in the same street, buyers can negotiate a good deal,’ he adds.
Peter Wetherell from Wetherell in Mayfair says the market has shrunk by a third over the past year – in 2007, 136 homes were sold in the Mayfair area, compared to 48 so far this year. The total value has nearly halved, down from £392 million in 2007 to £225 million in 2008.
‘The first half of the year saw a flight out of cash into tangible assets in the “super prime” market,’ he says, which shows a different picture, particularly if you include figures for “off market” transactions – cash sales or sales through companies – that do not appear on databases
‘The number of sales of homes over £10 million is to date equal to the whole of 2007 and the total value is substantially higher due to an increase in market value and quality of sales,’ Mr Wetherell points out.
However, the third quarter of the year has seen a return to the “core market” between £4-£7 million.
‘There is a good deal of overpricing,’ Mr Wetherell explains, ‘which cons the vendor.’
A new trend for Mayfair, perhaps, is repossessions – Wetherell currently is shadowing five of them totalling £40 million.
Last year, Wetherell sold £86 million worth of property and this year has sold £90.895 million due to a flourishing first half of the year in “super prime” sales.
‘In general, values have held over the last year with reductions being the result of overpricing. Comparisons of exchange price to asking price on some homes shows a drop of 5-10%,’ Mr Wetherell adds.
The credit crunch is hitting all areas of the property world, including property search agents, says Charlie Ellingworth from Property Vision. ‘Clients are down by 31% on last year in London and the country – but up in France. They are only down 20% on 2005, a more “normal” market.’
The second home market has been particularly badly hit, points out Mr Ellingworth. ‘If you don’t have to buy, then the easiest decision is to do nothing.’
There is still strong demand at the top end from “petrodollar buyers” though, although the signs are this is softening as well. ‘These buyers read the newspapers too,’ adds Mr Ellingworth.
There are three stages vendors have to go through to play the credit crunch through, he suggests:
Indignation – what do you mean my home is worth only that amount?
Resignation – okay, I will sell, but my pricing is just behind the market
Capitulation – if I have to sell at that price I will, but the plus side is I am selling cheap and buying cheap
‘Almost every seller is a buyer. For anyone trading up, falling prices are a good thing. This will sink in eventually, but it will take time,’ Mr Ellingworth notes.
William Carrington from LonRes, a company that supplies a database of sales figures to subscriber estate agents, says transactions are down by 50% in the capital, but he sees London as a separate market, which doesn’t necessarily have a ripple effect on the rest of the country.
‘More people have to listen to what their agents are telling them with regards to reducing prices,’ he says. ‘The difference in affordability and income has grown ever wider.’
Mr Dickinson agrees and says there are longer chains and more of them are harder to keep together.
‘We are seeing more people renting and sitting it out. First time buyers are the catalyst that drives the market forward, but many can’t afford to buy or are nervous,’ concludes Mr Dickinson.
* Houses for sale in London and the country