• Loading stock data...

Is the housing market about to crash? Here’s how to beat it

Prices slashed, offers scarce, outlook murky: 53% of Britons expect a housing crash in the next five years, but it’s not bad news for everyone

Reduction, reduction, reduction is fast becoming the estate agent’s new mantra. It doesn’t matter what the location, if a property has failed to go under offer, or even stretch to a viewing a month, then the odds are that the price needs cutting. Brochures, if they are still produced, no longer state the guide price, as it’s too costly to reprint for every downward adjustment; and vendors are switching property portals to tempt new audiences.

One third of sellers have already been forced to cut their asking price last month, as the property market stalls. And 33% of UK homes on the property portal Zoopla were originally listed for more money before their prices were trimmed, according to the firm’s research. Yet the average value for a property in the southwest has broken £250,000 for the first time, according to the Land Registry. 

So what exactly is going on, and what does it mean for you if you are planning to buy or sell? The housing market is becoming increasingly fractured, depending on where you live and where you stand on the property ladder. Owners of large family homes are struggling to downsize, as second-steppers cannot afford to trade up; first-timers are hopeful; and buy-to-let landlords are selling up.

Then there is the growing number of owners who are choosing to stay put. The average cost of moving home has increased by £628 over the past year to £11,624, including stamp duty, Lloyds Bank reports. London has seen the highest rise — thanks to soaring property prices — with a hike of £10,225 (47%) over the past decade.

The latest residential market survey from the Royal Institution of Chartered Surveyors (RICS) reflects the mixed regional picture. More than half of the respondents to the survey reported a fall in prices, the weakest polling in the capital since 2008.

Is this the tipping point? Transactions have slowed, if not stagnated. In an exclusive YouGov poll for The Sunday Times, 53% of Britons said they believe there will be a housing crash within five years.

The research, commissioned by TheHouseShop.com, also showed that 24% think a crash will occur within two years. Millennials are the generation most likely to think that a slump is inevitable — although this may be as much to do with wish fulfilment as with economic nous.

Isabel Stanton, 26, a brand content writer, has made inquiries to Help to Buy and the Bank of Mum and Dad, and considered commuting from the sticks, moving to Bournemouth or subsisting on baked beans. But now she has settled on the most realistic approach: she’s praying for a property crash.

“I’m fed up,” says Stanton, who pays £900 a month for a flatshare in Fulham, west London. “Even if a significant other came along, I couldn’t afford to buy a flat. It sounds negative to pray for a housing crash, because it will affect the economy and jobs. But it feels like, unless something drastic happens, I’ll be renting for ever.”

It’s not only the wannabe first-timers who are waiting for a fall. Some estate agents have noticed a trend for people to sell and rent, so they can watch the market. Their ambition? To be in a chain-free position when the right house comes along, then to negotiate the keenest deal they can.

“Renting a large house for two years will cost you less than the stamp duty on buying it,” says Tim Hassell, a renter himself, and managing director of Draker Lettings, which has offices in Kensington, Notting Hill, Chelsea, Fulham and Battersea. “There are a lot more large houses on the market to rent right now.

“There are also people waiting to see if prices will go down with Brexit. There could be a storm brewing. People have geared their lives around low interest rates — if those go up, it could trigger a sell-off.”

One of those playing the waiting game is Tim Harris, a buying agent, who recently sold his four-bedroom family house in Wimbledon, southwest London, for more than £1m so the family could leave the capital. He tried to buy a house in Farnham, Surrey, but that fell through, so he decided to bide his time. He has rented a five-bedroom property nearby for £2,500 a month and enrolled the kids at a local prep school.

“It makes financial sense right now,” says Harris, 40, whose property-search company, Austin Harris, covers Surrey and southwest London. “It could work in our favour with the market just to sit and see what happens. We’ve signed a one-year contract with a six-month break clause.

“Over the summer, I’ve seen a lot of price reductions. I have a gut feeling that the market is due a slight readjustment. Renting puts us in a strong position as buyers — and if we find something that needs work, we’re not going to be living on a building site.”

Also watching and waiting is Andy Hackett, an events company owner. He put his two-bedroom maisonette in Ealing, west London, on the market two years ago for £488,000 with Foxtons. After it failed to sell, he tried again in December 2016, at £475,000. He sold it last month through another agency, Dexters, for £442,000 and moved into a rental property in Islington, where he can walk to work at his company, Dynamite Events. “I didn’t want to buy because I know what the market is like at the moment,” says Hackett, 39, who splits the £2,200 monthly rent with a friend.

“Everyone I know who buys property has stopped what they’re doing for now. They’re all adopting a ‘wait and see’ approach. Prices have come down from when I started looking at the end of last year. I look at the alerts.

“There’s a nice one-bedder near me that went on at £425,000 — it’s already been reduced to £399,000. There are discounts to be had, it’s just how far will it go. I’m going to sit on it for now and assess the situation in the new year.”

For Celia Walker, the situation is quite the reverse. A former oil broker in her early fifties, she is quite simply stuck. She has already bought her dream home, a Georgian renovation project in the Cotswold village of Filkins, but despite having put her Oxford house on the market a year ago, and her willingness to slash the price by millions, she remains without a buyer.

She was advised by an estate agent a year ago to market her sprawling seven-bedroom Victorian-style property near the Dragon prep school, with elaborate plasterwork, underfloor heating, temperature-controlled wine storage and half an acre of walled gardens, for £9m, as they had valued it at £8.4m. Walker deemed that greedy and put it on for £7.95m after researching what comparable homes in the area had recently sold for. She has had 20 viewings since then, but, although she has reduced the price twice — to £6.95m in March, then to £5.95m in June — she has had only a few “serious but low” offers.

“I have just completely missed the market,” says Walker, who is now trying to sell the home herself (07811 466509, celia.walker15@gmail.com). “Viewers have said they love it, but are concerned about prices plummeting and the uncertain economic conditions.”

Sarah-Jane and Justin Biddle are aware that the market has shifted. They regret not taking an offer made the first weekend after they put their grade II listed Georgian home, moments from the beach at Selsey, West Sussex, on the market in March.

Back then, they were asking £1.15m for the renovated five-bedroom house. Now they have reduced the price to £895,000 — not far off what they bought it for (01243 832600, struttandparker.com).

The couple, who have three children aged between 6 and 10, are considering letting it so they can make their next move to the Isle of Wight. “A lot of people viewing the house, which comes with a former coach house, say they aren’t in a position to move because they haven’t managed to sell their own homes,” says Sarah-Jane, 46, who has a background in marketing. “So they are really only window-shopping. Others are actually cancelling their appointments on the day they are due to visit.”

There is now a more relaxed attitude to making the next step and renting for a while, says Philip Harvey, managing director of the top-end buying agency Property Vision. “But be careful if you’re looking for the bottom of the market — most people miss it,” he says. “If you look at the long term, even with the price reduction, London is still 40%-60% higher than it was in 2007. The countryside is only up 5%-10%, and a lot of people are moving there from the capital. But there’s a low supply of good quality.”

Harvey warns that if you’re waiting for prices to fall in a hotspot such as the Hambleden Valley, in Oxfordshire, or Chichester Harbour, in West Sussex, they probably won’t. If you do want to rent and hedge your bets, you might have more luck in a suburban market. He suggests trying “somewhere like Esher or Weybridge, where American bankers may be leaving”.

Can’t sell: Celia Walker has cut the price of her home in Oxford from £7.95m to £5.95m — but still hasn’t found a buyer

The gap between the least and most affordable parts of Britain has almost doubled since the 2007 financial crisis, Yorkshire Building Society reports. Again, though, the picture is mixed: looking at house prices and local income, some areas, such as Haringey, Hackney and Sevenoaks, are up to 61% less affordable, while in others, including Inverclyde, North Ayrshire and Sunderland, affordability has improved by as much as 42% since the crash.

Renters, who are chain-free, are looked on more favourably by vendors in the competitive market up to £1.5m, says Jo-Anne Neighbour, head of sales at Savills’ office in Islington, north London. In the first quarter of 2017, rental transaction levels tripled year on year at the estate agency’s “super-prime lettings” office.

Robin Chatwin, head of Savills in southwest London, recently sold a £4m home owned by a family who were anxious about Brexit. They are renting for a year while aiming to leave the capital. “My advice to those choosing to sit out the market for a while is to rent something smaller than they hope to buy,” Chatwin says. “Then they won’t feel their new home is a compromise.”

Renting in London has also become cheaper than buying, as yields have fallen from 5% to 2% in the past four years, according to Henry Sherwood, managing director of the Buying Agents. He thinks it makes sense to buy a fixer-upper at a lower rate of stamp duty, then use the money you save on the lower tax to rent while renovating.

Yet Sherwood doesn’t believe a market crash is imminent. “This is different from 2008-09,” he says. “Lending was more relaxed then than it is now. People were overgeared. Lenders have made it harder to get a mortgage, to prevent a crash.”

He also warns against renting for too long: “Try to set a date. At the end of the day, renting is dead money. You are paying off someone else’s mortgage. And prices can turn quickly. People get obsessed with buying at the right time. Look at the big picture.”

Changing forecasts
Prices will rise by 1.5% in 2017, then 2% in 2018 and 3% in 2019. “As Brexit negotiations continue, confidence will be volatile, which will have implications for the housing market recovery,” says Fionnuala Earley, chief economist at Countrywide.

SAVILLS The agency revised its forecast from no change to prime London prices in 2017 to a 1.2% fall, or -2.1% in the most central areas. It blames “political and economic uncertainty”.

RIGHTMOVE “The market remains price-sensitive. Buyers, many of whom are sellers too, will struggle to afford to pay much more,” warns the property portal’s director, Miles Shipside.

NATIONWIDE Prices will rise by 2% in 2017 thanks to “the stock of homes on estate agents’ books remaining close to 30-year lows and the number of homes coming onto the market remaining subdued,” says Robert Gardner, the building society’s chief economist.

PWC Values in the capital will rise by 2.8% in 2017 and 3.8% in 2018, but growing unaffordability and stamp duty will hurt its market in the long term. Across the UK, expect prices to rise by 3.7% this year.

HALIFAX House prices will go up by 1%-4% across the UK in 2017. “Prices should continue to be supported by low mortgage rates and a shortage of properties for sale over the coming months,” says Russell Galley, managing director of Halifax Community Bank.

HOMETRACK London prices will remain depressed in the long-term. “Turnover is down 15% from 2015 and sellers are slow to accept downward adjustments in prices,” says the firm’s insight director, Richard Donnell.

LSL “We expect sales volumes to remain suppressed in the second half of 2017,” says the chairman, Simon Embley.