Harbinger of boom
PUBLISHED: 10:26 11 July 2008 | UPDATED: 15:18 20 February 2013
Location, Location, Location's Phil Spencer scans the county's property market and reveals why Essex could still see a housing boom if you make the right investment
IF YOU catch even a quick glimpse of the news at the moment, you would be forgiven for thinking that the property market is in complete freefall - but is this really the case?
It is worth remembering that there are opportunities in slumps as well as in boom times, and never is this truer than in parts of Essex. As the scaremongers warn that we are teetering on the brink of a property crash, some people thought I was mad to open a new regional office of my home search company, Garrington, to cover East Anglia, but I believe that it is a very sound investment indeed.
There is no doubt that things are very different to how they were this time last year and conditions have been shifting on a fortnightly basis within a very polarised market. Not only are different postcodes and price brackets behaving quite independently from one another, but these microclimates are fluctuating all the time.
One thing that is clear though, is that there is a drop in the number of property sales across the UK - and Essex is no exception. There seems to be a trend of 'buyers are from Mars and sellers are from Venus' with buyers thinking that they can pick up a bargain well below an asking price. Stubborn sellers seem reluctant to accept the situation and more often than not, are failing to see any drop in price as a relative one which they can make up again on a purchase.
This is particularly true in areas such as Chelmsford, Brentwood and Loughton where there has always been demand for properties in previous years and owners have got used to high prices. But is this evidence of a property 'slump' across the county? Not at all.
At the time of writing, the prime Essex market in which Garrington East operates, has shown a reasonable degree of resolve. Our feeling is that although confidence has been eroded and prices are dipping, the prime sector of the Essex market (£2million+) will outperform general trend by a respectable margin for the year as a whole.
Buyers and sellers in the prime markets have good credit ratings and tend to apply for smaller ratios in terms of loan to value and so are largely unaffected by the credit crunch itself. We also know from experience that exceptional properties in desirable locations will always be in demand - regardless of how the financial markets are behaving.
At the lower end of the Essex market, the bottom rung of the ladder has effectively been removed. Transaction volumes are falling rapidly and chains becoming longer and more fraught. Traditionally the property ladder has always been pushed from the bottom, as first-time buyers enter the market stimulating activity at the lower end, but what is happening now is that the market is instead being stretched from the top. Long-term investors who picked the right stock are experiencing something of a mini-boom in the lettings market, as would-be buyers rent instead.
The Bank of England has announced it is making £50 billion of bonds available for banks to use to securitise mortgage debts, something the money markets have been unwilling to do. This will increase liquidity by allowing the mortgages stuck on lenders books (that no-one wanted to buy) to be converted back to a more liquid form, to permit re-lending again. The average mortgage deal should now start to improve (although admittedly, it could take a while to see this happen).
So, my advice? See a potential drop in price as a relative one, which can be recouped when you purchase. Don't let sentiment affect your chance to make your move.