What do athletics and house prices have in common? It’s not a joke, it’s a perfectly legitimate question… Give up? The Olympics.
An article from Reuters UK dated February 2007 explained that house prices had risen an average of 15% since London’s winning bid in July 2005. The highest prices were found in Leytonstone, Hackney and Clapton with 23%, 21% and 18% price rises respectively.
The last four hosts – Athens, Sydney, Atlanta and Barcelona – all showed mark-ups on their house prices when compared to the rest of their national markets, where Barcelona was the most impressive with almost a 50% mark up in comparison to the rest of Spain. However, it should be noted that these price rises all took place amongst property booms – not the slump we are experiencing or will experience in years to come.
Online property forums have demonstrated a mixed response from the public, where investment has been viewed in both positive and negative lights – those arguing the former have defended their arguments through the rise in Stratford house prices – a perfectly legitimate argument as East London homes generally start at a much lower base price than homes in other parts of the city and therefore price rises shall remain comparatively large.
However those against investment argue that after the Athens Olympic Games, there was a surplus in apartments on the housing market. Olympic developers Bovis Lend Lease are concerned that London’s property price crash will reduce the amount it would have benefited from selling or renting the homes in East London after the games. The Royal Institute of Chartered Surveyors have defended this opinion, warning that property boosts due to the Games has only been large when the city could re-invent itself, which explains the huge mark up in Barcelona.
Stratford’s property challenge therefore rests not only on the shoulders of London’s Olympic committee, but also on those of all us Londoners. Whether Stratford’s new sports, entertainment and tourism facilities continue to function depends very much on the willingness of London’s professionals to invest and live within the area once the games have ended. Though rubbing elbows with the millions of visitors expected to arrive for the games may not be everyone’s ideal, there is little doubt that the Olympics offer a genuine opportunity for the rejuvenation of the maligned east end. Perhaps then the Olympic effect could be the shot in the arm London needs given the recent slump in the UK housing market.
For further information on the current housing market and expert opinion on the Olympic effect, visit the Property News page on Knight Frank UK.
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Experts in property research Knight Frank have kindly agreed to let us use information from their market research press releases to add expert knowledge to our blog. Some comments recently made by Liam Bailey in the Residential Market Forecast 2009 coincide with issues raised in this article –
Liam Bailey comments on the market recovery process: “Our recovery picture is based on the assumption that mortgage providers will adopt a far more conservative lending approach once the credit crunch unravels. However, it is also worth noting that we do not have the oversupply problems of Spain and the US, and, indeed, a shortage of housing will become more apparent with time. Whilst a market peak is hard to spot, so too is the bottom of the market. There are lots of buyers watching the residential market very closely, and they are desperate not to miss the floor when it comes. Equity backed investors are already active, and more are waiting for prices to correct in the forthcoming months.”
Mr. Bailey has also commented on those who are benefiting from the current economic downturn: “The winners in this market will be anyone with equity who can buy over the next six months. Those requiring significant finance will be unlikely to be quick enough on their feet. Vulture funds and cash-rich individuals will be the first to benefit. [...] It may be hard to stomach but opportunistic buyers are looking for distressed property sellers. They are interested in individual properties – repossessions in particular – and also development land, or even newly completed developments. In fact, anything where values are felt to have fallen as far as they are likely to.”
For further information from Knight Frank, please refer to their news site at http://www.knightfrank.co.uk/press/
There has been much debate regarding the long-term effect of the current credit crisis on the British housing market. Some believe there is no end in sight for the trend of falling property values, while others believe house prices may begin to rise by the end of 2008. However, many commentators are quick to voice their opinions with arguments based almost solely on personal experience within the market. It therefore becomes a rather daunting task to filter through the available information, and come to a conclusive decision about whether now is a suitable time to enter the market.
Today, an article in the Guardian reported that British house prices fell slightly less in the months leading into October 2008 than those leading into September 2008. While this seems to imply that the market has hit rock bottom and has begun a slow crawl upwards; house sales have hit its lowest in the last 30 years - according to the Royal Institute of Chartered Surveyors (RICS).
The article goes further, stating that economists believe a housing resurgence is way off, with reports of London’s estate agents selling as little as 6.4 properties per month. This negative view of the market has most recently been felt by builders Taylor Wimpey - who cut 1,000 jobs today and who are currently investing more of their work into affordable housing.
On the contrary, an article from the BBC has reported that 20% of RICS members believe sales will rise by the end of 2008. This optimism is perhaps undercut by the fact that just 4% of members experienced a rise in sales in September. The rise in sales is expected to develop from sellers admitting that their asking prices must be dropped to complete sales - “Sales should increase in the coming months as more and more sellers understand that greater realism is the only way to make that long desired move”, a spokesperson said.
So where does this leave you, the potential investor? Given the gloomy economic environment, it’s understandable if you are weary to take the plunge into the housing market. However some feel that this is the ideal time to do so. First time home owners with a secure work situation and the need for a buy-to-live property can take advantage of the low property values and recently cut interest rates. Likewise, the more affluent who possess excess liquidity can surely take advantage of the market for secure long term investments. The housing market always has a way of bouncing back - and the key is realising that bargains exist at every stage of the market, with today’s climate being no exception. So take a walk to your nearest realtor, if only for a look, as you never know if the perfect opportunity is just waiting to be grabbed.