Is it a case of “bottoming out” or not?
June 30th, 2009
As Alan Bennett said, “life is rather like a tin of sardines – we’re all of us looking for the key” and the same could be said about the current state of the rural property market.
In recent months, various property experts have given conflicting views on the state of the residential property market with some predicting further dramatic falls until 2010 whilst others state that the market is bottoming out and values may start to climb towards the end of the year. It is indeed a confused picture.
Over the past three months, the RICS has reported increasing buyer interest and there appears to be growing confidence amongst agents. In April 41% more Chartered Surveyors reported a rise rather than a fall in new buyer enquiries, almost certainly fuelled by reduced interest rates and the fall in values. There are signs of increased sales and this is our experience but it may be far too soon to say that there are green shoots of recovery.
Residential values have generally fallen by up to 20% during the past year and rising
unemployment, low consumer confidence and reduced availability of credit should all point to further deterioration. It does seem however that the rate of decline is slowing. Supply is tight, partially caused by changes to the HIP rules, and this has contributed to the market being firmer. We know of a large number of motivated cash buyers keen to purchase, particularly in the middle to top end of the market, who are becoming increasingly frustrated. Where the right properties do reach the market then sales can be agreed quickly and bidding wars are still occurring with exceptional prices achieved.
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After rapid rises in value between 2006 and 2008, the value of farmland has now stabilised as demand has fallen dramatically, particularly from lifestyle buyers. There is interest from outside investors seeking land do exist but recent demand has primarily come from neighbouring farmers seeking to expand further. Average land values, as reported by the RICS, appear to be in the region of £5000 per acre and that would accord with our experiences. Values are being under-pinned by a shortage of supply and the tax benefits of owning land. It does seem likely that values will remain stable for some time with good quality farms and land being in demand whilst poorly located land of lesser quality being more difficult to dispose.
So , although the key may not have been found just yet, there are glimmers of hope that the tin may soon be open.