sales market 2008

TRANSACTION LEVELS ‘BUMPING ALONG THE BOTTOM’

In the second half of 2008 the sales market was characterised by a historically low level of activity. There were fewer properties on the market because:

• Discretionary vendors avoided selling in a falling market;
• Vendors elected to rent out property through the downturn in salesprices, with a view to selling at some point in the future when they hope to see prices recover;

• The flow of properties onto the market was disrupted by decisions to “batten down the hatches” and stay put to ride out the recession;
• Vendors were increasingly realistic about the lack of buyers able to achieve financing and complete a purchase. Equally, there were fewer buyers, due to:
• City workers, and others, concerned for their job security as redundancies spread from financial services to other sectors;

• The restrictions on lending to new borrowers by the banks;
• The absence of buy-to-let, investment club, bulk investors and other private investors due to the credit squeeze;

• • Decisions by City workers not to invest their (reduced) 2008 bonuses in an asset class where prices were falling, but instead to look at alternative investment vehicles and to reduce their borrowings.

In July and August 2008 the sales market in Midtown, City (Bloomsbury Property, Marylebone property ) and Docklands was depressed, with negative sentiment compounded by the holiday season and a “wait-and-see” attitude on the part of potential buyers. In the first two weeks of September, however, there was an increase in sales across all our offices in part stimulated by banks such as Abbey and Halifax who lowered their mortgage rates in an attempt to stimulate new business. Anecdotally, this increase in activity was mirrored across the rest of central London. After 12 months of the banking crisis, it seemed that the green shoots of
recovery were finally emerging in an arid market. These fragile shoots were trampled, however, by the announcement on 15th September 2008, that venerable Wall Street bank Lehman Brothers had filed for bankruptcy and would not be rescued by the US government. From that point until 6th November, when the Bank of England’s MPC announced its radical base rate cut from 4.5% to 3%, the section of the sales market dependent on mortgage finance in Midtown, City and Docklands was effectively closed down. The choking off of new lines of mortgage finance in 2008 left the market almost entirely reliant on cash buyers, or buyers with very substantial proportions of equity – at least 60%. In Midtown, City and Docklands( Isle of Dogs Property ) , cash-rich buyers account for about one third of demand in a “normal” market.