Predicting the market

Karen Harrison looks at the impact of the EU referendum and changes in stamp duty on the North Cotswold marketplace

"What impact will the recent EU referendum and changes in stamp duty have on the North Cotswold marketplace?"

No estate agent, no matter how experienced, can tell you exactly what your home is worth but the more working knowledge in that marketplace, the more accurately it is possible to predict what is actually achievable. With the very best agencies it’s a complex mix of skills - part research, part instinct, part memory - plus an informed and detailed understanding of wider trends and influences upon the local marketplace.

To enable an intelligent and structured approach towards gaining the best possible price, at Harrison James & Hardie we start our detailed assessment before we go out to a property by compiling a file of similar homes from our own extensive ‘sold stock’ records and additional information provided by Rightmove / Zoopla. These latter reports are available to any agent of course, anywhere, irrespective of proven sales ability in the local marketplace. However there are trends and fine-tuned variations on price, even from street to street, that someone simply printing out a report based on land registry statistics won’t begin to know. Achieving the right price is not a simple art. It relies on the benefit of something best described as ‘informed gut instinct’, built upon a seasoned understanding and longevity within the local marketplace.

As with all things in life, the longer you have been doing something, the better you get at it - subconscious competence, if you like. Achieving the right price can be positively affected by a sensitivity to a mood or a fleeting memory when inspecting the property, something that prompts us to take a calculated risk on a really ambitious figure or reminds us of the perfect buyer we went out to see last month, someone who hasn’t yet got their home on the market but would jump for the right thing, for example. An out-of-town agency would struggle with a list of sold prices when it comes to unique period properties, where an experienced local agency has a huge inbuilt advantage. The North Cotswolds is a massively varied marketplace that requires a consistent team - each person in Harrison James & Hardie has worked for years acquiring detailed knowledge and a broad memory bank. A property on Blockley High Street may have little in common with its neighbour but reminds us of a beautiful cottage we recently sold in Bourton on the Water, for example.

If we are lucky some of the disappointed purchasers may still be looking because, of course, to value correctly it is important not only to know your property but also to know your purchasers. We always take into consideration the requirements of our list of registered applicants, their spending power and confidence levels - without knowing detailed specifics of potential buyers you cannot hope to pitch the marketing price at exactly the right level. At Harrison James & Hardie we invariably list in pairs, as some of the team will have an overview of the whole marketplace whilst others on the team will know which registered buyers are likely to suit a particular property – if it’s a large cottage within grounds of a couple of acres then a director might go out together with a branch manager whilst for a starter home in Moreton in Marsh, Ewan or Jake will know of several registered buyers prepared to offer and will therefore be best placed to advise. The most important thing, with ten of us listing day-to-day, is always ‘best person for the job’.

Our stamping ground at Upper Rissington is a perfect case in point.  With a detailed background history over a period spanning three decades, the team at the Bourton office have a clear edge when assessing the critical tipping point on values between ambitious and plainly unachievable.  Having been involved from the sell-off of the original base and as advisers to the new homes developers, we perfectly understand the differing benefits between the old RAF homes and the new. We also know, for example, that Smith Barry Crescent and Circus can command up to 10% more than similarly sized properties elsewhere on the development, because we always have several potential buyers for this address at any given time. We have recently achieved full asking price sales and/ or competing bids on several properties in the village, old and new, even after they have been unsuccessfully marketed by other agencies beforehand, proving there is no substitute for experience and that such valuable knowledge translates into success for our vendors.

More generally, seasonal peaks and flows amongst different categories of buyer also create shifts in demand, which pattern only becomes obvious from sales information built up year after year. A property suited to the Cotswold retirement market will find more potential purchasers by launching in early spring than in late autumn, for instance, whilst families prefer to complete on transactions when there are no exams, from late July until Christmas. To know these variations gives us a well-developed sense of potential and opportunity. Then there are the wider influences – what is going on in London, what is happening in the mortgage markets, whether there is a general election or indeed a referendum – all of which impact on the local market, of course.  Information is power. Reading the prevailing mood and asking our purchasers how they feel about the market when out viewing, talking to our partners in Fine & Country in Mayfair and discussing the general pace of the market with local solicitors for example, our conclusion about the likely value of a property is dictated by the anticipated level of confidence and competition between buyers for a particular type of property at the precise moment it is launched - and timing can make very a real difference to the result. 

The best example is the evidence of the first six months of 2016.  Just before stamp duty increased by an additional 3% for investment buyers, we knew there would be a surge in demand for prime period properties and for small modern homes that were particularly suited to the residential lettings marketplace. We advised vendors in those sectors to be really bullish on price but to work to exchange as quickly if possible. Record times for exchanges were achieved in the first quarter with many agreed sales completing in days - we even negotiated for one vendor to stay in the property as a tenant for the following six months so that the deal could complete in time. Normally choice-led, cash rich buyers are never under pressure, rarely in a chain, independent of financing, inclined to stick than twist if there’s a confidence dip. Each transaction has to be a serendipitous mix of perfect opportunity and desire - if it’s not right, it won’t happen. Mature, sophisticated and mortgage free, these purchasers will usually just choose to sit tight than make an impetuous decision (even if they initially offer) because doing things right now is rarely important.

The first quarter of 2016 simply created an unsustainable spike in the upper quartile marketplace, a lovely opportunity for those who timed it well but with the additional meltdown following the EU vote, this sector was bound to be hard hit as investors temporarily scurried for cover.  Once the new stamp duty threshold came into effect on 1st April this year, coupled with the waiting game on the EU referendum, the number of investment buyers was always likely to subside.  So should we be worried about the lack of activity in London, now, for example?  Given a home priced at £1.2 million that would have commanded less than £65,000 in stamp duty taxation until April now requires a cash lump sum from a second home purchaser of just under £100,000, and beyond that price it is even more punitive, if George Osborne intended stamp duty hikes to create a sharp braking effect on escalating sale prices in central London and to prevent investors from dominating desirable areas such as the North Cotswolds then he has achieved the trick. 

The autumn / winter market is usually extremely active with ‘London’ buyers but there does seem to be a bit of a hiatus – such purchasers are keen for a bargain and clients are dead set against price reductions - however with a flurry of new instructions coming in towards the end of October, and despite news of a plummeting pound, it has been business as usual in the main marketplace.  Prices may still have to undergo a reality check in the upper quartile sector then, but for now it’s more of a waiting game than panic stations. Suffice it to say that if a prime property is placed at a sensible price, there will still be plenty of interest as we discovered in August when we achieved over asking price for Brewhouse Cottage in Oddington immediately after it was launched. London-centric agencies are largely dependent on the international investment market place but we are equally strong in the local residential marketplace and have found good reason to be cheerful.  As one sector weakens, the other has simply picked up pace – as we reach the end of 2016 our company figures are likely to equal 2015’s result, the best in a decade.

Why?  Well, families were always far more likely to be interested in looking once the exam season was over, and as the first quarter concluded we realised that this sector was quickly building in confidence and competition. For spacious modern homes including luxurious properties up to £850,000 and above, an energy surge has been driven by entirely different motives and constraints no matter what the outcome of the referendum – a house bursting at the seams, an aspiration to fulfil, a seductive mortgage opportunity to secure and an impatient buyer pressing for exchange, the summer a perfect time to complete and so on. Given the number of attractive mortgage products that have recently been launched and the severe disincentives set in place to deal with investor over-enthusiasm, the battle for local homes of all types since the referendum has been largely between young couples and families. We recorded an extraordinarily good first quarter this year based on the surge of investment purchases, but the decline we initially expected after Brexit has failed to materialise. We conducted more viewings and agreed more sales in the second quarter than the first – then peak activity in July and a remarkably brisk summer holiday period.

Of course, this concerted revival can be traced back to a significant difference in recovery rates in the main residential market over the last decade compared with the prime second home market. A desirable period village home today will typically command 20% more than its pre-crash value whilst a modern estate property will achieve much the same as it would have at the height of 2007. Availability of new-build stock has been suppressing competition of course, coupled with a general lack of willingness amongst lenders (until recently) to agree high loan-to-value borrowing. The far greater impact upon activity and confidence is not the woes or successes of the stock market but availability and attractiveness of finance – whilst the impact of Brexit may have left the pound reeling, the advantage has been exceptionally low lending rates. When selling and buying in the same locality, there is always a balance between the price you sell for and the price you pay. Right now, first time buyers local families have come out to play, feeling relatively safe from the challenge of a speculative investor landlord. At last, they can actually afford to buy a place or to upgrade to a larger family home after many years of having to squeeze and make do.

If there has been an impact on the health of the local marketplace it is the very top end that is feeling the pain right now, whilst the outlook for the main market in 2017 still feels remarkably healthy. Whatever happens as the impact of Brexit takes effect we will be anticipating change, reading the signs and advising our vendors accordingly.  Please just bear in mind if you want to achieve the best possible price that the cheery chap extending a licked finger in the air and offering you a cheap fee is not your answer, nor the poor soul who only deals with ‘the London market’ reporting as if the world has come to an abrupt end. There is every reason for confidence as long as you choose an agency that really understands the local market and is demonstrably able to stay ahead of the curve.

To speak to Karen, telephone 01608 651000 or e-mail