Is the british property market totally dead?
December 4, 2008 6:44 PM Subscribe
My friend has a one bedroom flat in Edinburgh in Scotland which is let as an overseas landlord arrangment. The tennant is moving out, the flat has an excellent tenancy record (full occupation at all times during the 10 years it has been let out. But it might be time to sell it. Will putting it on the market make it hard to let? Is the British property market now so bad that selling it shouldn't be considered?
On average, house prices were at their peak this summer. Now, they've fallen to where they were late 2005, across the UK as a whole.
That said - it's VERY regional, down to individual blocks of streets. Flats are doing better than houses. Areas with a lot of similar housing, areas reliant on a particular local employer, and areas that were struggling before the crash are seeing the biggest drops. Some areas are still seeing increases in prices, though they're growing increasingly rare. Due to the lack of new mortgage supply, buyer numbers are getting very low - estate agents are often down to a single sale a week, or even less.
It would be advisable to see what prices are like in the local area, as that is more relevent than the national picture - most estate agents are online now, for comparison shopping. A quick sale is a lot less likely than it was though - he may need to go through more than one accepted offer before he gets someone capable of getting the mortgage together - especially as he'll be in first time buyer territory, and the 20%-25% deposit requirement has made them a rare species indeed.
posted by ArkhanJG at 9:22 PM on December 4, 2008
That said - it's VERY regional, down to individual blocks of streets. Flats are doing better than houses. Areas with a lot of similar housing, areas reliant on a particular local employer, and areas that were struggling before the crash are seeing the biggest drops. Some areas are still seeing increases in prices, though they're growing increasingly rare. Due to the lack of new mortgage supply, buyer numbers are getting very low - estate agents are often down to a single sale a week, or even less.
It would be advisable to see what prices are like in the local area, as that is more relevent than the national picture - most estate agents are online now, for comparison shopping. A quick sale is a lot less likely than it was though - he may need to go through more than one accepted offer before he gets someone capable of getting the mortgage together - especially as he'll be in first time buyer territory, and the 20%-25% deposit requirement has made them a rare species indeed.
posted by ArkhanJG at 9:22 PM on December 4, 2008
My understanding is that the Scottish property market has had less of a crash than the rest of the British market, but it never had quite the same boom as the rest of the UK market (new build luxury city centre flats in Glasgow excepted). The whole mechanics of buying property in Scotland saved the market from some of the worst excesses of the general UK market.
Your friend is selling in a relatively down market, but not as down as it could be. I don't know what's prompting the idea of a sale. So necessary's right - some of this property bust is Daily Mail handwringing, and it really does depend on the area. Whatever happens with HBOS, I get the feeling that the Edinburgh market will just tick on.
If they can, I'd hold on to the flat. The longer you hold on to a property, the more equity you have when you eventually sell it. Prices will eventually go up again. If the flat is consistently let in an up market, it's likely paying for itself. And in a down market, as more people look at renting vs. buying, it's still a pretty safe bet. Unless they have a really hideous buy-to-let mortgage and are overleveraged, why sell?
posted by Grrlscout at 10:15 PM on December 4, 2008
Your friend is selling in a relatively down market, but not as down as it could be. I don't know what's prompting the idea of a sale. So necessary's right - some of this property bust is Daily Mail handwringing, and it really does depend on the area. Whatever happens with HBOS, I get the feeling that the Edinburgh market will just tick on.
If they can, I'd hold on to the flat. The longer you hold on to a property, the more equity you have when you eventually sell it. Prices will eventually go up again. If the flat is consistently let in an up market, it's likely paying for itself. And in a down market, as more people look at renting vs. buying, it's still a pretty safe bet. Unless they have a really hideous buy-to-let mortgage and are overleveraged, why sell?
posted by Grrlscout at 10:15 PM on December 4, 2008
The issue is not house prices, the issue is that noone is prepared to buy at any price right now. This is because of widespread sentiment that a significant further adjustment over the course of the next 18 months - 2 years is likely. Here's some interesting number crunching on house sales stats for August this year.
Anyway, if your friend is not living in the flat and it is at present unoccupied, there aren't really any huge disadvantages from putting it into the market straight away. He won't be disadvantaged by the need to balance maintaining the flat to showhome standard at the same time as living there. I don't think I'd have any huge expectation of getting it shifted any time soon though.
posted by bifter at 1:09 AM on December 5, 2008
Anyway, if your friend is not living in the flat and it is at present unoccupied, there aren't really any huge disadvantages from putting it into the market straight away. He won't be disadvantaged by the need to balance maintaining the flat to showhome standard at the same time as living there. I don't think I'd have any huge expectation of getting it shifted any time soon though.
posted by bifter at 1:09 AM on December 5, 2008
If I were a prospective tenant - especially one moving into an unfurnished flat - then I would probably be very put off if I learned it was about to be put on the market. Whilst there are some people looking for short term lettings most will want something a little more stable; moving house is expensive. Unless the flat is really special or really good value for money tenants will be tempted to look elsewhere.
Here is a recent article on the state of Edinburgh: a conservative estimate of upcoming job losses here over the next year or so are in the region of 10,000 - a lot in a city of about 450,000. Edinburgh does have other economic strings to its bow but I think it would be rash to predict a bounce back in house prices against that backdrop.
Apart from the economic conditions of the city there is a pricing stand-off between sellers and buyers: neither is keen to step into a falling market where there is no reliable price baseline. The baseline will most likely be established when there is a wave of sellers who are either desperate or deeply pragmatic: for example financial institutes who have re-possesed.
If I were in your friend's position I would seek a reliable long term tenant and look to hang on to the property for the next 3-5 years.
posted by rongorongo at 3:15 AM on December 5, 2008
Here is a recent article on the state of Edinburgh: a conservative estimate of upcoming job losses here over the next year or so are in the region of 10,000 - a lot in a city of about 450,000. Edinburgh does have other economic strings to its bow but I think it would be rash to predict a bounce back in house prices against that backdrop.
Apart from the economic conditions of the city there is a pricing stand-off between sellers and buyers: neither is keen to step into a falling market where there is no reliable price baseline. The baseline will most likely be established when there is a wave of sellers who are either desperate or deeply pragmatic: for example financial institutes who have re-possesed.
If I were in your friend's position I would seek a reliable long term tenant and look to hang on to the property for the next 3-5 years.
posted by rongorongo at 3:15 AM on December 5, 2008
Yes putting it on the market will make it harder to let.
If you drop the selling price far enough you will always find a buyer, whether you want to do that is something only you can answer.
posted by Lanark at 1:06 PM on December 5, 2008
If you drop the selling price far enough you will always find a buyer, whether you want to do that is something only you can answer.
posted by Lanark at 1:06 PM on December 5, 2008
This thread is closed to new comments.
Take this article saying: "BIG FALL IN SCOTTISH HOUSE PRICES" when the facts are...
House prices have risen by 4.9% overall this year, and flats continued to show the most robust performance, with an underlying annual increase of 4.7%. (Although Edinburgh properties have performed less strongly overall.)
So, you know, if your friend had sold the flat *before* Q3 2008 - but no earlier, because house prices were still going up - that might have theoretically been the most opportune moment. But at the end of the day whether you sell it now or not it seems like the adjustment in price (given yearly increases, recent drops, and so on) is really +/- 5% either way. (See the graph for EH here.) If they can hang onto the flat forever by all means wait, but if they want to sell it soonish then it doesn't seem like "it shouldn't be considered." It's easy to see house prices going up and want to wait to enjoy the higher prices later on, but then see housing prices decline and want to wait until they recover their previous value, and rationalise yourself into never ever selling.
posted by so_necessary at 7:59 PM on December 4, 2008