As a thriller writer Martin Bodenham is used to plot twists although he hopes he can see what’s coming with property prices over the next year or two. Having sold near the peak he wants to buy at the bottom, capitalising on what he hopes will be a 20 per cent fall in the market.
He is not alone. Transactions and mortgage approvals have slumped as home movers weigh up their options in the face of depressing economic forecasts. Although with both inflation and house prices believed to have peaked it is a waiting game for those hoping to buy at the bottom of the market.
“We sold the house we were living in on the west coast of Canada and cashed in our shares and moved back to the UK at the beginning of last year,” Bodenham, 62, says. “We didn’t buy a house though because I thought, ‘Let’s not rush, this feels very toppy.’ I only went back into the stock market two months ago and with property I think we are past the peak but have a way to go yet.”
The former financier, who worked in private equity buying and selling businesses, is well versed in the vagaries of markets. “It needs to come off by about 20 per cent from the peak to be a buying signal for me,” he says. “I think the average house price needs to come down to around £220,000 before it even looks like the time to go in.” The average house price in the UK was £296,000 in October (believed to be the peak) according to the Office for National Statistics.
Until he finds the “detached country home” he desires, he and his wife are renting on the Rutland/Leicestershire border. The Bodenhams had their fingers burnt when they bought a home in 1988, “ending up underwater by 20 per cent in 18 months. It is a mistake I don’t plan on repeating,” he says.
Advertisement
He is watching the property portals but also putting in “cheeky offers” when a home he likes comes up. “Either you wait until pricing across the board is adjusted or you put in an offer that reflects where pricing is going to be, but be prepared to lose it [the purchase],” he says.
Matthew Sleight, 40, an accountant, is also used to monitoring the business forecasts for his work but admits it’s “a minefield trying to interpret property price predictions” as he, like Bodenham, tries to time the market.
There is no consensus among economists or property professionals on how far the market will fall or for how long, with estimates varying wildly between a real 30 per cent (adjusted for inflation) to a nominal (unadjusted) 1 per cent dip and everything in between. Those that think it will fall tend to foresee a decrease through 2023 with recovery from the second half of 2024.
Sleight sold a three-bedroom semi-detached house in Plymstock, on the outskirts of Plymouth, Devon, in October for £430,000 — £10,000 above the asking price. He paid a £3,000 early redemption fee to leave his five-year fixed-rate mortgage two and a half years early. Now, having paid off the mortgage, he and his wife and two children are renting a farmhouse on Bodmin Moor in Cornwall while he waits for the opportunity to buy a three-bedroom semi closer to the centre of Plymouth — mortgage free. “I think we can save £80,000 on the type of house we want if prices come off by 10 per cent,” he says.
Sleight, like Bodenham, lost money in a previous property price fall; for him it was the global financial crash in 2008, something he describes as “painful”. This time round he says he has become “an expert on local prices”. He adds: “I look every day at the price movements on Zoopla but I still don’t think sellers are being realistic, the prices are not competitive.”
Advertisement
The process of the property market switching from one in favour of sellers to better for buyers is likely to take time. Tom Bill, head of UK residential research at Knight Frank estate agency, says: “More people will put their details into an affordability calculator and prices will come under increased pressure as budgets are recalculated after 13 years of ultra-low borrowing costs. We expect this process to last into 2024 so picking your moment as a buyer is not straightforward.”
“Buyers certainly shouldn’t feel a sense of urgency and it’s likely their position will only improve over the next six months. However, timing the market is a risky strategy and buyers will still have to embrace uncertainty later on. Nobody will ring a klaxon when prices hit their nadir,” says Alex Mosley, director of Perrygate, a buying agency in London. “It’s worth remembering that when the market does bottom out, sentiment will be poor and many will be convinced further falls are to come.”
Lucian Cook, head of residential research at Savills estate agency, agrees. “The reality is that you tend to find transactions at their absolute lowest when prices bottom out,” he says. Buyers tend to leap into action when prices are coming up the other side of a dip, when they realise prices are not going to go any lower. Timing is very difficult not least because stock is constrained at the bottom of the market with less stock — fewer people want to sell at the bottom if they have a choice.” He adds that, peak to trough, the fall in property prices in the global financial crash took about 18 months, a scenario we could see repeated this time.
Timing may be fraught but since 2008 all regions of England and Wales have experienced growth in the average price of property, although this total growth is far greater if the home was bought during the trough in the market rather than during the peak.
According to Matthew Henderson, associate director of residential research at the estate agency Strutt & Parker, the average difference over the long term for those who bought in the trough versus the peak has been most extreme in London (26 per cent) and least in the North East of England (7 per cent).
Advertisement
● The most expensive house sales of 2022
It’s not just house prices that those wishing to time the market need to consider. If they need a loan, mortgage rates will be a key factor. “We won’t see fixed rates starting with a three any time soon, but those buyers who look back in a few years’ time and congratulate themselves on their timing are likely to be those who got the right mortgage offer at the right time,” Bill says.
Fixed mortgage rates rose steeply in the wake of former chancellor Kwasi Kwarteng’s mini-budget on September 23, from an average of 4.75 per cent on the day of the budget to tip over 6 per cent three weeks later — although they have settled back down to about 5.5 per cent since then.
Personal factors often override a desire to play the market for many, with divorce, debt and death always providing clear reasons to move — although perhaps school entry should also be added to the list. Richard Winter, an independent buying agent in Surrey, says: “Lot’s of clients are buying a family home they want to stay in for ten years, it is a long-term purchase. They are not particularly worried whether it drops in value by 10 per cent, they are more concerned about getting their kids into the right school in time.”
It is likely that for those buyers with a long-term perspective the prospective of falling prices will be a bargaining incentive rather than a reason to stall on a purchase. As Henry Pryor, an independent buying agent, says: “Most people expect prices to slide this year, but very few are expecting them to plummet. If you can afford the property you want and expect to be able to do so for the next five years then use the current uncertainty to negotiate a great deal. But while it may lose a little in the short term I expect it will be worth more by 2028.”
