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Welcome to the Hamptons Battersea and Wandsworth end of year review and forecast for 2017.
The idea is to give you a sense of what we experienced though 2016 and some insight into what we expect from 2017.
The year started with plenty of optimism, we had just seen some of the most profitable years in recent times and capital growth was rife. The feeling amongst the industry was one of confidence and there was little worry that much would change. We entered 2016 with the looming increase in stamp duty which helped drive the market for the first quarter, applicant levels increased, those who had paused their search resumed it and it was clear there was an appetite to buy from anyone that could be affected by the additional 3% tax for second home owners. Despite a looming referendum surrounding the EU, confidence was high and people were buying.
Then came the shock result of the EU Referendum – to speak candidly like much of the nation or certainly those based in London with jobs or lives that could be affected by such a decision, I was worried. This clearly affected market sentiment and the general air of uncertainty did pause the market for a time.
However we remained resilient in Battersea. While those clients buying second homes or investments had all but ceased to exist this was a theme post stamp duty change and not post Brexit, This is exemplified by the 2nd quarter being our busiest across 2016 even when compared to the buoyant first quarter. We are more reliant on domestic based buyers looking to purchase long term homes. People who “need” to move as opposed to “want” to move, They are moving due to growing families, changings in life circumstances, job locations or a growing trend over the last few years – leaving London for the home counties, London suburbs.
This type of buyer remained consistent throughout 2016 not only due to a need to move to facilitate life changes but also because it was now physically possible to do so. For the first time in several years owners of property could actually buy and sell at the same time. For those outside of London this may be common but the pace of the market within the country’s capital in recent times meant many had to sell and rent in the interim to compete with chain free buyers. This more relaxed approach, especially for families, meant chains were more widely accepted and fall through rates decreased when compared to their typical national average. It also meant that they were financially able to upsize their home. In previous times if their asset rose by 10% so did their onward purchase and quite simply, priced them out of any potential move as wages failed to rise at the same pace.
Add to this the other buyer type, first time buyers, the entry level, those taking advantage of low interest rates and favourable mortgage deals. Not only were they able to borrow money cheaply but there was less competition and price stagnation which meant that they could finally get on the ladder. In times before this was near impossible with the competition and lack of stock available. In 2016 buyers had choice, favourable mortgage deals and no cash investors making life difficult. These buyers were savvy enough to know if the market takes a further tumble banks will tighten their lending to protect against negative equity. 2016 proved a far more beneficial time to buy in many people’s minds.
In addition just as there were two buyer types there were two property types that were still proving exceptionally popular. The first property type was entry level property, that is property selling to first time buyers, the demand at this end of the market always remains consistent due to all the aforementioned reasons. The second property type was unique and exclusive property. Property on roads or squares which do not come to the market often enough to warrant following market trends. As long as these two areas of the market remained strong we would see a positive year.
London and Battersea has proven itself to bounce back time and time again. 2008 was still fresh in people’s minds and by talking logically with regards to pricing we were able to keep sales consistent. In addition to historic data the current economic climate was showing sprouts of positivity, yes inflation is rising but wages are too, in excess of inflation. Mark Carney has stated that he will avoid raising interest rates during uncertain times. The fluctuation in exchange rates have affected the price of Sterling but this increased the sentiment of INTbuyers in many markets. International buyers made up 29% of our buyers in 2016 and whilst the Asian buyer market has declined in the last quarter of 2016 from 6% to 4% much of the remaining INT buyer market, such as buyers from the USA and Middle East, has increased.
We are under no illusions that 2017 may be another uncertain and difficult year to navigate. However the level of experience we have within our company has already shown that we can stand out against our competitors. The requirement for a modern day estate agent with knowledge of not only the housing market but of how the economy and political climate will affect the market is now a mandatory one and this is something we know our staff are competent enough to satisfy.
Conditions in the economy and the housing markets could be an awful lot worse. Monetary policy pursued by the Bank of England has eased the cost and availability of finance and has undoubtedly helped to support the economy through the latest shock. In addition, the new Chancellor has taken the opportunity to move a little further away from the severe austerity policies of his predecessor. Money has yet to be spent, but more infrastructure investment and a loosening of the belt buckle will help the economy to perform through these uncertain times. And that is good for the housing market.
On the whole 2016 was a challenging yet rewarding year, we were well educated on how to advise clients on what to expect.
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