Ivor Dickinson, managing director of Douglas & Gordon, comments: “Less than 40% of the offers received in the last two months have converted into sales. This suggests there is a definite standoff between buyers and sellers who have differing opinions of where the market’s going. Vendors aren’t rushed and can afford to stay put; but buyers, who are out in their droves, perceive [mistakenly in our opinion in London] the market will weaken.
“As a result, a record number of vendors have unexpectedly withdrawn their properties from the market driving the cumulative number of properties available for sale down by 20% since October. Perhaps a 0.25% rise in interest rates might focus these sellers a little.”
Comments Dickinson: “Optimistic vendors seem to be expecting a Spring bounce in values, but this group mentality must mean there’ll be more sellers but at the expense of more choice for buyers, who still, on balance, have the whip hand. This may well increase the level of transactions, but against seller’s expectations may move values down a touch.
“With the 1% rise in stamp duty on properties over £1million in April, we expect to see an increase in activity at this level early in the New Year. This will increase the cost of moving by a least £10,000 and can only harm volumes at this level in the second half of the year.
“We expect European buyers to return, but this time because they’re keen to take advantage of the ongoing relative strength of the Euro before it perhaps weakens in the face of the difficult sovereign debt issues.”
Dickinson continues: “With rental stock levels still at an all time low and rents breaking through peak levels, it’s surprising we’re not seeing more buy-to-let investors coming to the party. One explanation could be restricted finance, but most banks are lending again and yields are looking healthy. The trouble is lack of stock on the sales market, specifically bullet-proof properties that tick all the boxes for would-be landlords.
“Also, landlords are less concerned about rental yields than they are about long term capital appreciation. We know of many landlords waiting in the wings waiting for the market to stabilise so they can buy in a rising market for the best capital growth.”
Virginia Skilbeck, lettings director of Douglas & Gordon, comments: “The tightening of the sales market due to continued economic uncertainty will mean more people will be forced into rented accommodation. Increasing demand will absorb the already depleted levels of stock; and with many professional landlords selling up, it’s difficult to see where supply will come from – other than the return of accidental landlords. This is likely to result in an average increase in rent of between 5% and 10% in 2011.
“With the market favouring landlords, tenants will have to position themselves as the best bidder to get the property they want. That may mean offering a longer tenancy, not requiring a break-out clause and being flexible to move early if required.”
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