Residential property prices in the UK have bottomed out with all the signs pointing to a stabilisation, according to the latest review but a two tier market is emerging.
The September bulletin from Black Brick, an independent search and acquisition property consultancy, points out that central London is leading the recovery with lack of supply and demand from those now receiving City style bonuses again means that prices are rising.
Indeed prime property in central London has seen the return of competing bids and gazumping. ‘Sellers are simply not prepared to reduce prices. Indeed, many potential vendors are withdrawing properties in the hope of further rises,’ the report says.
This has created two different viewpoints. There is often a sizeable valuation gap between the expectations of potential purchasers and vendors who see the market from understandably different perspectives. The gap in expectations has widened as sellers expectations firm,’ it adds.
Those who have the money are buying. ‘A big factor in the recent buoyancy of the London market in particular has been the renaissance of substantial City bonuses. The Square Mile is an important driver of the UK economy and the return to profitability of financial leviathans including the likes of Barclays, HSBC and Goldman Sachs has been a key driver to the recent Prime Central London price rises. Some of the recent awards will inevitably be spent on property. In tandem with an easing of attitudes by lenders towards large loans there is much to suggest that Prime Central London is in much better shape to rise further in the remainder of 2009 than the wider UK residential market,’ the report continues.
Elsewhere in the UK though, the picture is more subdued. ‘Recent data gives us confidence that the market has stabilised but further sharp, short terms rises are unlikely while unemployment continues to rise, credit markets remain closed and banks remain keen to reduce their exposure to property,’ the report says.
‘A two tier market separated by financing and location is becoming increasingly apparent. Cashrich buyers are competing for properties in a prime market still woefully short on supply and prices are rising. Away from these areas and further down the property food chain vendors are still struggling to sell. Bonuses and lack of supply are supporting the former, while rising unemployment is exacerbating the situation in the latter. There is little on the immediate horizon to suggest that this split will do anything other than widen,’ said Camilla Dell, Managing Partner at Black Brick.