Property prices are turning upwards in London and the southeast for the first time in three years. Houses stuck on the market for more than six months are being snapped up, and selling for more than the (often reduced) asking price.
Gazumping is also back, along with other tactics used in a competitive market. Sealed bids, attended exchanges (where both solicitors sit in the same room to speed up business) and contract races — when two interested parties sign a contract, and the first to exchange gets the house — are being employed for the first time in years.
“We had contract races on three deals a week ago,” says Peter Rollings, managing director of Marsh & Parsons, an upmarket London estate agency. “We had three buyers — a film-maker, and two City buyers — all chasing the same house in Notting Hill Gate. It sold for £2.25m — £100,000 over the asking price — after an attended exchange. The buyer chose not to wait for a survey or local authority searches.
“In another case, a buyer offered £50,000 more than a rival bidder and sent his solicitor on the train to Devon to get the deal done,” says Rollings.
The latest published property price indices all report an upsurge in prices, particularly in London, pockets of the southeast and Scotland. Last week’s figures from the Land Registry show that prices in Westminster rose by 20% in the last quarter of 2005. The reason? Growing confidence, City bonuses and, most of all, a lack of stock.
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The Sloane Street office of estate agency Savills has 1,000 registered buyers (a third can be discounted as not seriously looking), but only 70 properties to show them. Jonathan Hewlett of Savills says gazumping and sealed bids are increasingly common on homes from £1m to £10m.
“Properties are selling in one or two weeks rather than a couple of months,” he says.
However, the average time from acceptance of an offer and exchange of contracts in England is eight weeks, twice that of other countries. During that time, more than a quarter of deals fall through, usually because of poor survey results, buyers changing their minds or gazumping.
So how can you secure the house you want? And why do some conveyancing solicitors take 48 hours and some four weeks to exchange contracts? Dorothy Hurrell, a conveyancing solicitor based in Kensington, says one in 10 of her cases are contract races. She advises using a solicitor experienced in the type of property you want to buy. “I don’t want to be rude, but don’t employ a solicitor from Honiton or North Yorkshire. You need a central London lawyer used to dealing with complicated leaseholds, for example.”
“Sales are also slowed due to the length of time it takes to recover the title deeds from the lender,” say Hurrell. “One of my clients has been waiting three months. The lender lost some of the paperwork when my client remortgaged.”
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Ed Mead, of estate agency Douglas & Gordon, advises buyers who are also selling their own home to apply for their title deeds to help speed up the process and build a strong bargaining position.
Another tactic Mead recommends is for bidders to offer an exclusivity deal to take the property off the market for an agreed period. Until contracts are exchanged, nothing is binding — either party can walk away from the transaction with no penalty.
“Clever buyers will also get the seller to sign a non-refundable deposit to prove that they are serious,” says Mead. “About 10% of buyers make a non-refundable offer, although only half of sellers accept it. Last year, fewer than 1% of buyers made such offers.”
Michael Mitzman, of Mishcon de Reya solicitors, has been involved in a number of contract races and attended exchanges for top-end property sales in the capital. He says, “It’s down to money. If buyers don’t have their financing in place, they can lose out.”
Multiple offers are not just confined to the capital. Simon Brierley, of the George F White agency in Northumberland, reports a competitive market, with three sales going to best and final offers, the first since early 2004. Knight Frank’s Esher office had two deals gazumped in December, and Serena Brown of Browns estate agency in Surrey says: “The last time the market was like this was three years ago. Instructions are down 34%. A fortnight ago a pretty three-bed cottage sold within three hours of coming onto the market for 10% over the guide price.”
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The government hopes that the introduction of the new Home Information Packs (HIPs) next year, and the launch of e-conveyancing will speed up the housebuying process.
But last week, the National Association of Estate Agents (NAEA) warned that HIPs could lead to a reduction in the number of properties on the market, with sellers reluctant to pay £600-£700 for a pack.
HIPs may have another side effect, too. “The ability for increased numbers of people to have instant access to the HIP could increase the chance of gazumping,” says Peter Bolton King, NAEA chief executive.
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