Whilst the development and residential markets look bleak, the farmland market looks much brighter…
The residential market from a Banbury prospective started to really feel the cool winds of this property recession blow in during last December. The climate remained cool - but no worse - until around April and even in February some, including myself, thought that it may all blow over by late summer. However, since then just about every week has seen another negative story; another bank has realised it is more exposed to the US sub-prime crisis than it first thought, or another national developer has had to lay off half its staff…
It feels like around May when everyone grasped the fact that the situation is quite serious and not about to go away. Only then did we see developers, usually very hungry for the very limited number of available opportunities, appreciate that there were fast becoming more opportunities than buyers.
There are a range of figures and statistics regularly quoted in the press, all painting a pretty gloomy picture: Nationwide’s figures at the end of June show that house prices are 6.3% down on last June, but still 4% up on June 2006. The Land Registry figures are less gloomy, probably due to the time lag of the data. The Bank of England even back in April were reporting that property loans over £40,000 were down 49% on April 07 figures. The web portal Rightmove currently shows an average of 75 homes/agent although only 5/month/agent are selling.
Out of this doom and gloom a small number of deals are being agreed; probably at values that reflect where people think the market may bottom out. It is difficult to persuade a buyer to purchase a property at today’s values when all the advice is that this will get cheaper. But discounting the property to next year’s anticipated value – probably 15-20% off last year’s peak offers a sensible opportunity for buyers.
When the bounce comes – and it will, make no mistake, it is likely to happen very quickly. Most people will miss the bottom. Remember, before all of this, there was already had a housing shortage; the major developers won’t be able to turn the supply tap of new houses back on straight away and there are a large number of tenants in rented accommodation waiting for the right time to buy. Vendors are unlikely to be in such a hurry to sell if there are signs that values are on the increase again.
There are also a number of vultures circling, looking to see who is the most desperate to sell and just how much they can get knocked off the price. Some vendors are taking the lower offers and some are sitting tight planning to ride the storm possibly letting the property out if applicable. There are certainly some attractive opportunities available for purchasers with cash.
Enough doom and gloom. Let's look at the farmland market. Bare arable land that we were selling at £2,500 per acre just three years ago was probably worth £5,000 per acre 6 months ago and is now probably £6,000 per acre today. Some is even making £7-8,000 per acre. Lifestyle buyers seems to have throttled back but investors and farmers – probably driven by the better outlook for agriculture, have picked up the baton. Very recently there has been some apprehension about grain prices which have slipped back from £150 to £120 per tonne while fertilizer and fuel prices remain at record levels. We don’t expect values to continue to rise as they have been, but lack of supply is likely to keep prices high. The number of prime residential farms available is still significantly outnumbered by the number of buyers.
For further advice on buying or selling please do not hesitate to contact andrew.ranson@fishergerman.co.uk tel 01295 226288.
