18 Oct Swimming Against The Market
A Healthcheck on the High Wycombe Property Market
“I like the idea that if I ever required surgery the surgeon performing the operation would be an expert in their field. At the very least (in this country) I could rely on the comfort that they would have comfort that they would have completed a 5 Year degree in medicine, a 2-year foundation programme, 2 years of core surgical training in a hospital and (hopefully) multiple years of specialist training and experience in performing similar procedures. I dislike the idea that there is no formal training, no pre-requisite experience and absolutely no minimum intellectual standard is required to hold an office in the cabinet of the UK Government. It is entirely possible that a former banker could be the Minister of Housing. Or a gentleman who read classics at university and wrote a doctoral thesis entitled “Political thought of the recoinage crisis of 695-7” could have been the Chancellor of the Exchequer. I myself studied English at the University of California, Berkley & the University of London, Queen Mary’s. I completed the NFOPP Technical Award in Residential Lettings & Property Management in 2009 and have worked in the property industry for over fifteen years. More specifically I have run large estate agency departments in Bucks for almost a decade. Perhaps this qualifies me to talk about the High Wycombe Property Market? However, I would rather look at the data.
The data highlights that High Wycombe has a very active and dynamic marketplace. For example, this year there has been an average of 39 properties coming onto the market and a healthy seasonal variance. More importantly the delivery of “The Growth Plan 2022” has not triggered a surge in new instructions coming on the market. If anything, we have started to see a decline in new instructions.
Equally in a ‘houseprice’ crash we would expect to see other warning indicators becoming quite significant. The fall through rate is currently sitting at 6% per week at the average of 3 deals falling through a week in the town. Even during the summer months (when instructions and properties going under offer at their highest) this rate has not exceeded 15%. The most reliable measure of market activity must be completed sales. Unfortunately, we are three months away from obtaining this data from Land Registry in the House Price Index. Nationally completed sales transactions have been steady in the year to the end of May 2022 with an average of 60,000 per month (the variance is also nominal).
If we are to accept the data from the portal websites (Rightmove & Zoopla) as being a broad correlation, then we have seen no decline in exchanges since the fiscal event in September. There are a couple of more nuance observations about the town that they highlight.
Firstly, that the number of properties under offer is greater than the number of properties on the market. We highlighted this observation to you in April 21 and there seems to be no deviation from this position. This suggests that we have a pronounced supply problem and there is critically not enough properties coming on the market to meet the demand. Secondly there appears to be a consistent percentage (although minor) of properties requiring a price adjustment to make them saleable. When we first highlighted the dangers of instructing an agency that does not base your price to market on comparable, we warned you this could cost you thousands off your asking prices. In a marketplace where over 50% of properties are under offer it should not be possible for a sensible marketing price to be achieved. What is noticeable is how closely these sets of data correlate. In a week where there are a higher number of new instructions, there is a higher number of price reductions, higher number of sold subject to contract and a higher number of fall throughs.
In short, we have seen no evidence or warning indicators of a house price crash in this marketplace with the basics of the local housing market remaining stable since the fiscal event.
What has changed dramatically since the 23rd September 2022 is the mortgage market. Although Interest rates have been increasing this year they have spiked in the last month. On the 22nd September 2022 the base rate increased to 2.25% from the Bank of England. Subsequently we saw a contraction of available mortgage products which has eased slightly. According to Moneyfacts (data provider) the average cost of two- and five-year products across all loan to value levels is around 6.47% and 6.29% respectively. (The last time this occurred was back in 2008, 14 years ago!). In real terms a 25-year loan of £200,000 on a rate of 6.47% could cost you over £1300pcm. If the rate was around 3% this would equate to a saving of over £300pcm. Over the lifetime of a mortgage this could mean an increased cost of around £120,000 in total amount repayable. The Bank of England has warned that it will not hesitate to increase the base right further. Its next announcement is expected on the 3rd November, and we are expecting a further rate increase. We work quite closely with Abacus Money (part of the Mortgage Advice Bureau) and they are recommending their clients to make applications now in anticipation of further rate rises. Once you have secured a mortgage offer then typically the rate can be held for up to six months.
Following our review of publicly available market data on the housing market in High Wycombe the only sensible conclusion that we can arrive at is that we do not see the fundamental relationships changing significantly between supply and the demand for properties in the local area. However, we can quite visibly see that the cost you will now pay for that commodity has and will increase further.”