Any transaction beginning now is highly unlikely to complete by the end of June when the most meaningful savings end and yet the market is still flying.
There have been reports of property being difficult to sell in London and while, perhaps flats in Canary Wharf and the City of London have lingered on the market, our experience is that traditionally strong community areas such as Hampstead and Clapham are doing really well.
Agents everywhere are struggling for stock and we’re seeing demand exceeding supply on both rental and sale properties.
There are, of course, clouds on the horizon. The end of the furlough scheme is approaching at which point it is anticipated that more people will lose their jobs and the vast economic stimulus over the last year that is driving inflation is likely to lead to increasing rates.
Factors impacting demand
But there are also many factors underpinning demand. In times of economic uncertainty, investors like tangible assets and so flock towards property. You can touch it, see it and feel it.
Crypto currencies may have made headlines for stellar growth, but they are also a relatively unknown quantity riddled with uncertainty, as we’ve recently seen with the volatile pricing of Bitcoin.
And, with bank accounts paying little in interest, mortgage interest rates at all time lows and demand for investment property remains a strong contender. Crypto currency profits might continue to find their way into property, with the bull market widely predicted to continue into Q4 2021.
So, there are both upward and downward pressures in store for the market in the future, but currently the pressure is only going in one direction. An increasing number of properties are selling for above asking price and going to sealed bids.
This can make it difficult to manage expectations on the valuation of a property. In a highly charged market where potential buyers are competing over sealed bids, a property becomes worth what somebody is willing to pay for it.
In valuing a property for a mortgage, a surveyor must assume a prudent buyer (as defined in RICS Market Value) rather than one in a bidding game. Brokers play an important role in helping to manage buyer expectations on this front, but they have an even bigger responsibility to protect the finances of their clients.
How to help clients
As prices surge ahead and your clients further stretch their finances to secure their dream property, their resources to fund any potential repairs once they move in will shrink.
This means that an unexpected defect in their new home will hit their finances much harder than if they had secured the property at a cheaper price. So, where clients are competing for property, it becomes even more important that they invest in a survey upfront.
They would probably think very little about increasing a bid by a few hundred pounds and that same amount could save them many thousands down the line if it were spent on a professional inspection of the property.
Who knows what the future brings with this crazy market, so make hay while you can, but don’t leave your clients exposed. When prices are arguably over-heated, it’s more important than ever that they protect their investment.