House prices rose by 0.9% in London, this reverses all the price declines throughout July – October 2010. Prices are higher now than they were in March by an immense 23.7%.

There was a weak period in the June/July sector of this year but now the buyers registrations are becoming secure, significantly from European purchasers. The strongest segment in price growth is £1m – £2.5m; this is a 2.3% growth. Sales volumes have risen 500% and in the performance sector the strongest is £10m.

Liam Bailey, head of Residential Research at Knight Frank, commented:

“One of the key factors which has helped prices begin to rise is that vendors are now accepting that the very ambitious asking prices (which were the norm until the early Autumn), are counter-productive. More realistic asking prices have allowed competitive bidding to take place in some instances and therefore have contributed to pushing prices higher.

“The other key issue which appears to have driven prices higher over the past month is the ongoing lack of stock. This is especially true in the SW1, SW3 and SW7 postcode areas, where stock volumes are lower by 32% compared to this time last year.

“The scarcity of sales stock is compounded by a tight rental market in central London, which is reducing alternative options for potential purchasers. Anecdotal feedback from the market confirms that the “safe haven” role played by central London property is still being recognised by international purchasers.

“The view taken by many new entrants to the market – and the volume of new applicants from Europe looking to buy in central London has risen 23% year-on-year – is that London property is a strong defensive option as the events in the Eurozone continue to play out and while the pound is still trading at a discount to the Euro.

“Spanish and Italian interest is very strong – with a year-on-year growth in applicant interest up by 40% from these markets.

“Outside Europe there is still the demand from Asia-Pacific buyers, who have benefitted from 30% to 50% price growth in Hong Kong, Singapore and other key Asian centres over the past year, and are keen to take advantage of the weak pound and take money out of what have become arguable very hot markets in Asia.

“Despite recent price growth in central London, Eurozone and Dollar based buyers are still able to achieve an effective discount of 14% and 26% respectively due to currency movements on March 2008 prices in London.

“One sector which has underperformed against the wider PCL market in terms of pricing is the £10m+ sector. Prices in this bracket rose on average by only 0.3% in November, and are still down by 0.2% over the past six months. Despite this weaker performance in pricing, sales volumes have performed very well.

“After a dearth of £10m+ sales in summer – volumes were down 80% in July and August compared to the levels seen in 2009 and 2008, there was a sharp rise in activity in October and November, with volumes on a par with strong final quarter results in 2009 and over 20 £10m+ sales each month across the market.

“How can we explain this recovery in high-end sales? Confidence. An example is the Knight Frank Kensington and Notting Hill offices, which have jointly completed five sales over £10m in the last six weeks. While the sales were in the main to international buyers, all these buyers were already living in the UK and they were looking to upsize their accommodation.

“These were all buyers who had been considering buying for over a year, but only by October and November did they have the confidence to enter the market.”

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Demands for homes in London and the South East have opposed housing market despair as Berkeley Group has posted a strong increase in profits.
Pre-tax profit was up by 19% and revenue profit was also up by 19% at £336.2m these are figures for the last six months.
Money due on forward sales had increased by 22% in comparison to this time last year. There is a high possibility that the full year forecast will be beaten.
“This strong set of results represents an excellent performance from Berkeley at a time when the economy is looking to find traction for what is proving an elusive sustained recovery,” said the group’s chairman Tony Pidgley.
“Underlying demand for the well-located, quality homes developed by Berkeley in London and the South East [means] the group is well positioned to deliver enhanced shareholder value.”
The average house price fell by 0.3% in the UK this is shown by the latest figures released by Nationwide.

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Last month house prices fell by 0.3%. Nationwide have claimed that this no different compared to last years figures.

Martin Gahbauer, Nationwide’s Chief Economist, said:

“The recent trend of modestly falling house prices continued during November, with the price of a typical UK property declining by 0.3% on a seasonally adjusted basis between October and November. The three month on three month rate of change – a smoother measure of the recent price trend – rose from -1.5% to -1.3%.

“This remains well above the deeply negative rates of -5% to -6% that prevailed during the most severe phase of the downturn in 2008. The annual rate of change – which compares house prices to their level 12 months ago – fell from 1.4% to 0.4% and suggests that house prices are essentially unchanged from a year earlier.

“There is little evidence to suggest that house price declines are likely to accelerate in the months ahead. Much of the weakness in property values since the Spring has been driven by a return of sellers to the market, following unusually low levels of property for sale in 2009 and early 2010.

“However, there is little to indicate that these sellers need to achieve a sale urgently for financial or economic reasons, which means that the downward pressure on house prices is only modest. In addition, there are early signs that the flow of new property onto the market may be slowing down again as potential sellers observe the recent weakness in prices and decide against marketing their properties at the current juncture.

“Similar seller behaviour was observed in late 2008 and early 2009, eventually leading to a decline in the amount of property on the market.

How does the current downturn compare to the early 1990s?

“Three years ago – in November 2007 – house prices as measured by the Nationwide Index began to fall, ending a decade long boom. At the three year anniversary of the first house price falls, it is worth considering how the current down cycle has evolved in comparison to the last major housing downturn in the early 1990s.

“A general conclusion that can be drawn is that although house prices have so far fallen by less than
they did in the early 1990s, house purchase activity has fallen by more. Over the first 18 months of the current downturn, real (i.e. inflation-adjusted) house prices tracked the path of the early 1990s very closely.

“Over the following 18 months, however, real house prices staged a small rebound, whereas in the early 1990s they continued falling broadly at the previous rate of decline. As things currently stand, real house prices are 19% below their 2007 peak, whereas at the equivalent stage of the early 1990s downturn, they were 31% below their peak.

“The most likely explanation for this is that while real interest rates remained very high throughout the 1990-1992 period, they have fallen dramatically into negative territory in the current down cycle, providing more support to mortgage holders.

“The supportive interest rate environment shows up clearly in the number of repossessions, which has been much lower in the current downturn compared with the 1990s.

“One measure on which the current downturn has been weaker, however, is house purchase activity. Whereas in the 1990s the number of mortgages taken out for house purchase initially saw a large decline from unsustainable highs, it then settled close to the long-run average.

“In the current downturn, house purchase approvals have fallen to an all-time record low
and are still close to 50% below the long-run average. This weaker profile of approvals is primarily due to the fact that the current housing downturn was accompanied by a global systemic banking crisis that limited the availability of credit.

“In the 1990s, by contrast, the banking system did not suffer a comparable crisis and the flow of credit did not become as constrained.”

Catherine Penman, head of research, Carter Jonas, commented:

“The stalling economic situation reinforced by the Comprehensive Spending Review, weak outlook for mortgage demand and public sector cutbacks collectively imply a further weakening of demand in residential property over the year to come.

“Although house prices have only fallen by less than 2% in 2010 across the UK as a whole, this disguises a wide variation in activity. A notable improvement in both pricing and sentiment was evident during the first half of the year which has since been counteracted by an increasingly cautionary tone and heavy downward pressure on prices during the second half of the year.

“This negative pressure is expected to continue with an estimated 5% decline in house prices across the UK expected in 2011 as job losses intensify. A regional divergence will become increasingly apparent moving forwards with the country house market.

“Whilst not immune to the national housing market slowdown, it is expected to be sheltered to an extent. Good quality product priced at realistic levels will continue to sell well with stock levels remaining generally low and demand resilient throughout the prime markets.

“Central London will continue to lead the pack in terms of recovery during 2011 due to its reliance upon the high earning financial and business services sector and a strong international investor profile. With an acute shortage of stock registered in most London markets, activity is likely to reduce over the forthcoming months.

“That said, the volume of buyers remains consistent. There has been a notable shift towards the purchasers’ perspective and away from the domination of the vendor which has been the main characteristic over the last two years.

“Best in class stock is currently achieving in excess of 2007 prices, although potential purchasers remain very price sensitive and there is a widening price differentiation between the best and the rest. Pricing will become increasingly sensitive as we move into the seasonally busy spring market and we anticipate London house prices to increase circa 5% during 2011.

“In light of the continuing difficult economic climate and funding restraints, demand within the central London rental market is forecast to remain strong during 2011. That said, applicants remain price sensitive and whilst rental levels are projected to increase, it is predicted to be at a lower rate than witnessed previously in 2010, at around 3% to the year end.

“With austerity measures and public sector cutbacks set to firmly take hold over the next year, UK house prices are expected to fall further in the short-term. Inevitably, isolated bubbles of activity will buck the trend although overall, we predict a fall in values of circa 3% in 2012.”

Many people have been forced to overcome barriers in their search for new homes to rent.
The dilemma of letting agents asking potential tenants to make sealed bids in order to rent a property is forever increasing in the current climate. This practice is relatively commonplace in the market to buy homes, but is seen as a new development in the rental sector.
Due to the mortgage Leicestershire lending shortage there has been higher demands for rented accommodation. People can not afford mortgages at present, therefore forcing them to compete for rented accommodation to secure themselves a tenancy.
Sealed bids may only be asked for where the properties are in intense competition. This is found in areas where buyers cannot receive a mortgage so have to continue renting.
Experiencing the biggest rise in rent in the current market is London; however this doesn’t mean other cities are exempt. A third of landlords have seen an increase in rent all over the UK.
James Moss, a director of Curzon Investment Property, said that without access to finance, buyers could not purchase homes.
“Combine this with rising student fees and job losses across the public sector, and what we are left with is facing up to being a nation of renters as the home buying dream is eroded,” he said.
Richard Davies, head of lettings of Chesterton Humberts, said that there was no mystery in the sealed bid process.
“If we do have more than one offer for a property, what we do is give a deadline for people to submit their best and final offers. All those offers go to the landlord who will decide who to go with,” he said.
“But even if your offer is refused, do not be too despondent, because sometimes the winning bidder’s references do not check out, in which case you may be offered the property.”
Sealed bids are not a device to get tenants to argue against each other and pay more, its merely healthy competition for the property.
Chris Norris, of the National Landlords Association (NLA), said they were mainly employed by managing or letting agents and used to ensure that once an offer is accepted it is final.
“The sealed bid has been seen as a fairer option, compared to a situation when a landlord may agree a tenancy in good faith, only for another would be renter to come along and say that they are prepared to pay 20% more,” he said.
“Many landlords might be tempted to take such an offer, but that is not fair on someone who thought they had found somewhere to live.”
Sealed bids will be here to stay due to the current market – as long as many renters are chasing after good rental homes.