Meet the New Smugs. They are the owners of homes bought when pessimism in the property market had reached its zenith; before any green shoots had taken root, and way before anyone dared suggest that the housing market might recover.
At the end of 2008 and in early 2009, as the economy headed into recession, the majority view was that buying was foolish. In January, this belief contributed to the lowest number of sales per estate agent since records began, according to the Royal Institution of Chartered Surveyors — which put the figure at just three transactions per estate agent that month.
But the rot had set in even earlier. Ask any estate agent and they will tell you that November was the worst month they can remember. Prices were down by between 15 per cent and 20 per cent by Christmas, with a fall of 35 per cent from peak to trough forecast. The gloom was a thick fog and no one could see a way out of it.
Yet now, as even the most bearish commentators have revised their forecasts to reflect the expectation that total falls will not be so dramatic and could bottom out in some parts of the country by the end of this year, this brave tribe of buyers has become the envy of bargain-hunters everywhere.
These proud new owners convinced desperate sellers to accept discounts off properties that had already had their asking price reduced by about 20 per cent from their peak. They persuaded developers to throw in some fittings for good measure and they succeeded in achieving every homebuyers dream: more space for less money.
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So was it good luck, or good judgment? A bit of both was at play, according to the buyers themselves, who can now look back with the benefit of hindsight. Heather and Rowan McGregor, who have three sons, completed on the purchase of their Oxfordshire home, last September, just as the pace of deterioration of the economic climate quickened. But the four-bedroom house in the village of North Moreton, near Didcot, fitted the family’s requirements, as Heather, who runs her own headhunting business, explains. “We had been renting a place with grounds so we wanted lots of outdoor space. This house may not have a huge garden, but it is next to the village cricket ground, the football pitch and the playground. So there is a great deal of space which we neither needed to pay for or to maintain.” Other advantages include The Bear pub next door and an annexe in the garden that now houses, among other things, Rowan’s cricket gear. Rowan, pictured above outside the house, manages an online wine business.
The McGregors’ purchase illustrates the benefits of waiting and watching in rented accommodation until an unmissable opportunity arises. The house was up for sale for £782,000 in 2007, the seller had switched agents and several deals had fallen through, When, finally, the McGregors offered £600,000, this was accepted, a reduction of more than 20 per cent on the original asking price, The McGregors’ desire to just get on with it once they had found what they wanted, regardless of the future direction of the housing market, is common among the New Smugs.
Philip Selway, managing partner of The Buying Solution, a specialist agent that buys prime property for its clients, says: “Four or five months ago, buyers were saying that they wanted to get on with their lives, rather than try to call the bottom of the market. We said that 20 per cent had already come off peak values, and we predicted a further 10 per cent fall and this reassured them. We told them that buying within 5 per cent of the bottom would be doing well. As it turns out, the best properties did not drop farther below that 20 per cent, and are now attracting competitive bidding, so they timed it right.”
Now that expectations of a recovery are commonplace, buyers’ bargaining power has diminished. Annual indices show prices still falling, but asking prices already reflect the bulk of predicted price falls; there are more buyers to compete with and less property to choose from, and it is harder to negotiate a discount.
Selway says: “It is easier to negotiate discounts on the way down. Negotiating is a little tougher now. Five months ago, there was such uncertainty that we would swoop in early with an offer to take the property off the market. We could take a fairly aggressive line and undershoot the asking price because the seller would be worried about gazundering and, by building the prospect of further falls into the offer, we would make them feel more secure. We can’t go in and steal it like that now. We have had to adjust our tactics as competitive bidding has returned.”
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Another owner, who bought a five-bedroom period property in Greenwich, southeast London, at the end of last year, before the en masse bargain hunt had begun, now describes himself as “very happy” with the decision. “We took the view that the market might fall farther, but this was an opportunity to acquire, at a discount, a period property with more space, for which there would have been high demand in the boom time.”
Such sentiments are common among the New Smugs now, but at the time, many, such as Richard and Hayley Jones, pictured left, were less confident. “It seemed terrible timing,” Richard says of the moment they had an offer accepted on their dream home back in January. But the couple, who have three children, had wanted the property for three years and seized their chance despite the pessimistic outlook. “With hindsight, there was an element of good timing. We bought when the house was cheaper than it had been, but not quite at the bottom, which might have helped with our negotiations,” says Richard, a sales director.
It also helped that they had a cash buyer for their previous home, a three-bedroom bungalow in Folkestone. “This definitely meant that we had extra bargaining power,” he says.
The value of the five-bedroom property, originally the show home on the Bayeauxfields development in Terlingham Village, Hawkinge, Kent, dropped from £395,000, when the homes were first marketed, to £375,000. The Joneses eventually paid £330,000. Pentland, the developer, threw in the blinds and curtains.
The couple, both 44, moved in with one of their three children in March. Richard says: “We counted ourselves lucky that we didn’t take too low an offer on our previous home and were able to get a good price on the new one. This was helped by the timing.”
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Even buyers who bought later on in spring, when the first signs of competitive bidding had begun to emerge, feel they were fortunate.
Pam Roberts and Karl Chappell, 28-year-old City workers in London, have just moved into a three bedroom terrace in Islington, North London, which had been priced for a quick sale. They put in an offer in April, having done their homework on the likely direction of the market. Karl says: “It’s better to buy on the way down, when buyers have some power, rather than try to pick the bottom and have to compete with other buyers on the way up. We will be in the property for at least five years, so any further falls should be recovered in the medium term.” But as Pam says, summing up the approach of the New Smugs: “We bought to live in the house and be happy, not for financial considerations.”