Estate agents say banks hold key to revival of property market

Jul 9 2008 by Alistair Houghton, Liverpool Daily Post

Relaxing mortgage lending is seen as vital to boost the property market. Alistair Houghton reports

THEY’VE been masters of spin since before New Labour was a glint in Tony Blair’s eye, so estate agents are never going to stand up and say “the market is in a disastrous state”.

But, even through their professionally rose-tinted spectacles, the picture is starting to look more gloomy with a flurry of bad news stories from housebuilders sending that sector’s stocks into a tailspin.

The credit crunch means banks have restricted their mortgage lending, so potential homebuyers have been unable to get the mortgage funding they need.

As the market slows, so prices fall and that puts off even more po-tential buyers nervous of negative equity.

It’s clear the housing market is slowing down, though agents are urging people not to panic. The Stock Market, though, shows no mercy when it thinks a sector is per-forming badly.

That’s why shares in leading housebuilders have collapsed this year as the credit crunch has taken hold and analysts fear mas-sive write-downs.

Leading house-builders have between them axed thousands of jobs. Barratt, for example, last week said it was cutting 1,000 jobs – including 60 at its soon-to-be-axed Chester office.

Construction com-pany Galliford Try also axed 260 jobs, Taylor Wimpey has laid off 900 staff, and Persimmon has con-firmed it had cut 1,100 jobs so far this year.

Last week, shares in Taylor Wimpey halved after the company warned it had yet to secure a £500m fund-ing package and said it faced breaching “one or more” of its banking covenants next year if the market continued to weaken.

Persimmon yesterday said the past six months had “undoubtedly been the most challenging period” in its recent history, with half-year sales revenues down more than a third. With house prices still falling, agents are tightening their belts.

Alan Bevan, managing director of Liverpool’s City Residential, said: “It’s really tough. I don’t think I or anyone else will be able to convince you otherwise.

“The thing that’s making everyone squeal is the lack of transactions. Whether it’s a lack of confidence among buyers, a lack of funding, a lack of will, or an issue of afford-ability, there’s certainly a scenario where there’s very little happening.

“I’ve got a lot of friends in the in-dustry and it doesn’t matter whether it’s city centre, suburban, or Wirral, everybody is substantially down in transactions. The problem is if you desperately need to sell, you’re dis-counting sharply at the moment.

“People who are selling are people having to get on the market. That might be a repossession, financially struggling, or having to relocate.

“Those sales are going through. The price they’re going through at is lower than we’d deem to be the open market evaluation.”

Mr Bevan says the market faces “two or three tough years” but is al-ready showing signs of recovery as people begin to believe they can snap up bargains. The key, he says, is for the banks to relax their lend-ing criteria again.

He said: “There are people who think it’s going to pick up early next year. I don’t think that’s the case, but I don’t think it’s going to get any worse in terms of transactions.

“As prices get lower, we’ll get people thinking this is an opportun-ity to buy. We’re getting to a level where people will start to think ‘That’s a good price’. We’re starting to see that. We’d see that a lot more if the funding was there.”

If there’s one silver lining for agents, it’s that the lettings market appears to be performing well as people unable or unwilling to buy look for short or medium-term accommodation.

MERSEYSIDE firm Venmore said last week that it had seen a 25% increase in its lettings business in the second quarter of the year, thanks to a “significant increase in demand”.

Mr Bevan said his firm was also seeing strong lettings growth.

“There are rumours the market is oversupplied,” he said. “That couldn’t be further from the truth. We’re desperately struggling to get properties to let. We’re begging vendors to consider not selling.”

Liverpool agency Sutton Kersh took over lettings specialist Thomson and Moulton in November and says its lettings business is also performing strongly.

Partner James Kersh said: “It’s getting busier and busier.”

Mr Kersh says sales have gener-ally slowed, but says some areas are performing better than others.

“We’re finding things are slow on the sales front really at the mom-ent,” he said. “That’s not in all sec-tors. The south Liverpool sector is really sustainable and there seems to be regular transactions going on.

“It’s true that prices are not at the heady heights that they were and people are having to accept a lower profit than their expectations. But it’s not all complete doom and gloom.”

For Mr Kersh and other agents, the key to solving this slowdown will be the willingness of banks to relax their lending criteria.

“I think we might need to stay pretty tough up to the end of the year,” he said. “There’s now less liquidity in the market. It’s a simple situation – it’s the availability of mortgages.

“Funding isn’t as readily available as it was, and therefore that stifles people’s movement in the market. We have buyers but they cannot get funding.

“We’re digging in deep. It’s a real test of character and the fit and lean agents will win at the end of the day.”

One other ray of light is that high-value property sales are holding up.

Up-market property group Savills is opening its first office in the city to cater for high net-worth individ- uals who are able to access more mortgage deals from financiers than high street banks can offer.

Martyn Green, partner at city centre residential specialists King Sturge in Liverpool, agrees that, while the general market is slower, people with disposable cash or access to large mortgages are snapping up good deals.

“It’s a buyer’s market now, which makes things interesting,” he said. “There’s some pretty good deals if you know where to look. One part of the market not affected by this crisis is the £400,000-plus bracket.”

Mr Green says the One Park West development attached to the Liverpool One retail and leisure scheme is also performing strongly – thanks in part to the fact that developers are confident enough in the scheme to keep promoting and advertising it.

He said: “One Park West is in a great location, and allied to the Grosvenor brand and the Liverpool One regeneration. Plus, they’re one of the few developers in the city that are still brave enough to advertise. We’re advertising, we’re marketing, we’ve got For Sale signs up and we are pushing it. It’s attracting inter-est not just locally but nationally.”

The housing market will see growth return, if not in the next few months. Government estimates show that immigration and the increasing number of people living alone means the number of English households outgrows housing stock by 38,000 every year.

In the short term, it will be tough. But agents are confident they can ride out the bad times and wait for the good times to return.

“I’d be lying if I said the market was fantastic,” said Mr Green. “It’s not. But it you’ve got a quality product at the right price, and you’re marketing and advertising, it will sell.”

alistairhoughton