Property Natter - No dire straits…but no money for nothing, either

The RICS Residential Survey Report for March caused a bit of a stir this week – despite the fact that it announced everything we already knew.

It made number 2 on the BBC’s ‘top stories’ list on Thursday, just pipped to the top spot by Joe Biden’s visit to Dublin.

The funny thing is, what we in the industry have known for months, the rest of the world’s media are just cottoning on to:

1. The rental market has gone crazy because there are insufficient homes in the PRS;
2. Sales are flatlining – but deals are still being done as buyers become more accustomed to the new market conditions

The truth of the matter is that everybody needs to wake up and smell the coffee. We are no longer in a booming housing market. But that doesn’t mean the market is in dire straits. Believe it or believe it not (and those of us who have been around a while will see it for what it is) the market is returning to normal.

The RICS survey suggests that the market may be stagnating. It’s a cold sort of word and I’m not sure it gives a true picture of what exactly is going on.

On the rental side, we all know it’s simply a matter of supply and demand. There simply aren’t sufficient homes available within the PRS. Simple economics allows us all to predict that with too many renters chasing too few homes, rents are likely to rise further this year. RICS forecasts that rise will be 4%. That comes on top of hefty rises in 2022 which, according to Zoopla, saw increases in London of 16.1%. Other big cities like Manchester and Glasgow also saw significant increases.

But note how the rate of increases is falling. Perhaps this is a sign of things settling down.

And what of house sales? The RICS survey highlights a downturn in demand but this comes after a period of buyer frenzy following the pandemic.

We have to get these things into perspective and many agents are reporting increasingly buoyant sales activity as we head into Spring.

Here’s RICS chief economist Simon Rubinsohn: “A theme coming though in the anecdotal remarks is the need for vendors to recognize the shift in market dynamics. Significantly, there is also a sense that the medium-term outlook is looking more settled, helped by the perception that the interest rate cycle may be near the peak.”

All of this, of course, is predicated on the inflation rate beginning to come down over the next few months, but all the indications are that this will happen because of drops in wholesale energy prices, improved supply of imported goods and reduced demand at home caused by the cost-of-living crisis.

Small is beautiful…and cheaper

One of the reasons homebuyer demand has dipped has been the increase in interest rates and tougher LTV requirements from lenders. Homes now cost around nine times average earnings and we think that’s a lot. But it’s nowhere near the UK record.

In the middle of the Nineteenth Century, homes cost around 13 times the average salary – which might go some way to explaining why almost everybody rented back then.

So what did the Victorians and the Edwardians do to make houses more affordable?

Well, according to investment firm, Schroders, who conducted research into 170 years of house prices in the UK, they built more houses, they built smaller houses and they paid their workforce more money.

Building more homes is something the UK Government has patently failed to do for decades. First, they couldn’t hit their target of 300,000 new homes a year, then they scrapped the target altogether. According to the House Builders Federation, the number of new homes built this year could fall to as low as 120,000 – the lowest since the Second World War.

£6.5m price Spike

One London house that was snapped up this week – a snip at £6.5m - was the former Bayswater home of comedian Spike Milligan.

9, Orme Court was home to Associated London Scripts – a co-operative run by Milligan, Eric Sykes and comedy writers Ray Galton and Alan Simpson.

Among the comedy hits that were created in the property were The Goon Show, Dr Who and the Daleks and Steptoe and Son.

It has been bought by the Kosovo Embassy.

Spike, of course, is sadly no longer with us. He died in 2002 which reminds me of one of his classic one-line observations:

‘All men are cremated equal.’

Until next time.