The market headlines…

It’s all go go go. The market has shifted. Recession – what recession?


As you can see from the graph (taken from PropertyData) the world is smiling – especially in the property game. The dark years of 2008 are behind us. The flat-lining I have been talking about is … behind us. We should celebrate.

Or should we?


It seems that all of us need not celebrate. Those inside the M25 can – as the figures are so horribly skewed towards them.

Although the figures and statistics here don’t say a lot for the regions, We have noticed (as a firm) that there is a slight spring in the step of the market. There are more enquiries. We will always lag behind London but it does seem to be not as bad as it was!

The end of the valuer?

My professional Institution (the RICS) has commissioned an independent inquiry to consider the challenges facing the UK property valuation profession and look at solutions. The inquiry will take evidence from a range of organisations working across the property sector including banks, building societies, insurers, panel managers, property valuers and their clients.

Following the inquiry a report will be produced based on the evidence with recommendations for all parties to help address the balance of risk and reward and maintain high standards in valuation which is a vital professional service that underpins underpinning economic stability and consumer confidence.

And that is the official blurb.


So what is really happening?

Well, there are a number of firms who are now refusing to provide professional valuations. Some can’t as they haven’t applied for Registered Valuer status. But others are simply turning the work away. They consider that the risk reward profile is madness. Fees are incredibly low for the time needed to properly report with all of the due diligence ticked off. But then the cost of failure can be catastrophic.

we carry Professional Indemnity Insurance – the costs of which are rising as the Insurance market decides that we are too much of a risk!

We are coming to an interesting period where some valuations done in 2007/8 at the height of the market will be seeing some of the biggest falls in value. And the Banks are looking for someone to blame. Surveyors with a rich seam of PI Insurance are right in the line.

And this is the real reason why some valuers are turning their backs on this work. It simply isn’t worth doing …

Earlier in my career I recall a discussion about valuation – and the suggestion it is an art not a science. And part of that is a judgement – where we give an opinion. Sadly those days are gone – it is now closer to a science, it is an opinion with quite a lot of mechanical process – and certainly less and less of an art.

Market sentiment – on the up?

So Murray wins Wimbledon, the sun shines and I hear from more than one person that there is ‘more activity in the market‘. I’m not sure precisely what these words mean – more than what? activity is for burly blokes in the Army? But there’s some tails in the air. The agents are chipper.


The evidence doesn’t quite bear this out according to the Property Investor Bulletin for July. You can see from the graph that we are better than 2012, but still not as good as 2011.

But this is always the issue, valuers are always looking back – so, as the saying goes, we don’t make the market, we simply take the market. In fact, this situation is likely to start causing some issues over the next few months.

I have a situation where I have agreed to buy something but a third party firm have been asked to value for a Bank. They have down-valued by around 20% citing ‘evidence’ of past deals. The problem is that my client is prepared to pay a price and the vendor is willing to accept the same price – but no lower. In some ways that is the test of market value. But valuers have to watch their Professional Indemnity policies and there is no incentive to value up!

So this presents another issue – the threat of Insurance claims is holding the market down.

So, even if there is a green shoot (a horrible expression!) then it won’t necessarily be capable of being realised – as history still looks grim at this point!

Time – where does it go?

You may have noticed that my blog has been a bit quiet of late! I have dropped from my Sanatogen One-A-Day approach to the Martini method – anytime, anyplace anywhere…


There is a reason – and it’s not that I have run out of things to say!

I am busy. I’m not sure that the market is ‘on the up’ but my workload has, in the last six or eight weeks, gone through the roof. I have valuation work coming out of my ears! But, perhaps more reassuringly, I am buying and selling property again. I am actually doing deals. The days may be longer for sunshine, but my office hours have increased too. My colleagues and I are in the office for much longer.

There remains a fundamental problem with the property market though – finance. I can’t say that the High Street Banks are back lending again. The hoops you need to jump through are high and sometimes smaller than you can squeeze through. The confidence in the lending market simply isn’t there. In fact there seem to be more obstacles each time some of my clients talk to their banks.

Until that gets resolved the market is going to remain ‘bobbling along the bottom’.

But it’s not all the Banks fault either. The rules about them lending have been tightened and they are trying to improve their capital base – so they need to be risk averse. It’s a vicious circle.

We do need though to sort this out somehow…

In the meantime, the long hours will continue?

The market whimpers?

It’s been a little while since I blogged about the state of the market. It’s hard to try and find a story about what is happening in my professional world – when every month its the same old story – flat, flat, flat.

I was asked by a client last week whether the market had improved – there are stories about transactions taking place. I’m not sure I agree with that. I think the number of enquiries are up – we have more people looking around, but that’s a long way from deals happening.

Sadly deals are harder and harder to do. It’s a mixture of uncertainty over the actual value and the fact that the amount of due diligence from the Banking sector is at a level where every single i needs to be dotted and each t must be crossed. You can’t blame them – they had their fingers badly burned a few years ago…

I picked up my Property Investor Bulletin last week – it does show a bit of life in the market – but not as much as 2012 or 2011. We are slightly ahead of 2010. But the figures are hopelessly skewed by the London market. The two graphs below demonstrate nicely the state of play.

In terms of yields they have weakened in the last six months – but these are averages and the figures are minuscule changes as to make the figures a bit academic. The market remains flat!

Screen Shot 2013-04-12 at 17.40.15

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The Market – an update (more of the same)

Last month I blogged about the state of the market – you can read it here. It was all about London.

My latest edition of Property Data has arrived and it’s a familiar story – as you can see from the graph below. The market is better than the same period in 2011, but not quite as good as 2010 – in terms of volumes.

Screen Shot 2012-12-04 at 13.21.19

But once again the skew towards London is marked:

Screen Shot 2012-12-04 at 13.21.42

So it doesn’t really tell us much of a story. The only real difference from last month was the fundamental shift in the average net yield – it has shifted to 7%. This is a real weakening of the trend that had seen a steady improvement. In my example last month – had you used the initial average yield to value your £100,000 income (worth £1.602m a year ago) the value today would be £1.43m. These are averages and don’t really mean very much!

Locally I think we are as busy as we have ever been. I have a number of properties under offer (both buying and selling) and I seem to be looking at lots of opportunities. The latter can be quite speculative – but that is quite a good sign.

I am reasonably upbeat about 2013 – even though deals are harder to do than ever.

London romps – we follow

The latest figures from Property Data show an interesting story. On the face of it the number of transactions for the equivalent period looking back over the last four years looks health – as you can see from the graph.

And yields are going down (pushing prices up). Average yields have shown a slide as follows:

Last month – 5.82%
Last 3 months – 5.98%
Last six months – 6.19%
Last 12 months – 6.24%

To put this in perspective if you had an income of £100,000 in rent and valued it on the initial yield basis 12 months ago – it was worth £1.602m. Six months ago it had increased to £1.615, 3 months ago to £1.672m and last month to £1.718m. These are averages so you can’t really apply the figures to every part of the market. But it does show you the effect of the slight changes in yield – £116k profit for doing nothing!

The other fact is the skew that London has on the figures. In terms of volume of transactions the London office market accounted for £11.4bn of property. Compare that with the rest of the UK – which managed £3.6bn!

It really is a story of two-halves. London continues to attract investment (and there may be some influence still of the Olympics). The provinces bump along the bottom!

Market – this is the way it is for a while?

The latest data on the state of the market has been published. I haven’t blogged the data for a little while as it doesn’t relay warrant comment.

But you can see from the graph, things have remained fairly static for the last three years – but improved from 2008/9. This represents the value of investments traded in the years to date for the last three years.

The interesting fact is that the average yield has tightened in the last month – meaning that prices have increased. It’s a slight increase and you wouldn’t bet your house on it.

There is still a lack of funds in the market from the Banks – but we are seeing some private equity – looking to put money back into property. Perhaps property prices have stabilised at a low ebb – and the market sees opportunities.

We don’t really expect to see a rise any time soon. I suspect that we are bobbing along the bottom – with prices fairly stable. Money, if you can get it is cheap. But if you have money you can get double-digit yield returns – which you certainly can’t get on deposit. And who knows, in the longer term prices might go up.

We would all tell you that it is a difficult market to read. We would all tell you that it is ‘challenging’. But, we are still here and going strong. It would just be nice to see a little bit of confidence in the sector…

The values slide – an August phenomena, or the norm?

My Property Data book arrived this week – showing the state of the market to the end of July 2012. It’s become a fairly predictable story – flat, flat, flat.

Transactions are down on the same period last year but better than 2008 and 2009. Overseas based purchasers now are the single largest investors. The office market remains the biggest traded sector – three times that of retail. And nearly 80% of those transactions are in central London. It’s a skewed market in favour of the capital!

But the real story is in the average yields returned from property. I have said before that the average yield is a bit difficult as it covers all sectors and is a little crude but as that’s what you are comparing it to, then it gives quite a good measure. For the last 12 months the yield has been resolutely flat at between 6.27-6.46%. But last month it drifted to 7.08%. Thats quite a shift – over 0.5%.

I know not everyone understands yields – it’s part of a valuers black art (!). But in real money if you had an income of £10,000 pa – your value at a gross yield of 6.27% would be £159,489. At 7.08% it would have dropped to £141,242. A drop of nearly 13%…

So these apparent small shifts in yields make huge differences to the capital values. Imagine now what would happen if it wasn’t a corner shop you owned (paying the £10,000 pa) but a shopping centre owner where the rent roll was £1,000,000 pa. Ouch!

The question we face most days is ‘when will it change’.The answer is we don’t know. The smart money is on a recovery in late 2013 / early 2014 – in the run up to the General Election. And then a return to austerity again. Realistically I think it will be 5-10 years before we see any real growth…

Talking the market up …

The Bankers may have dented the confidence further of thee sector which isn’t good long term. But is there better news looking at the sales results for the last month? In a word – no.

Yields are moving out, meaning that prices are getting worse. According to the Property Investor Bulletin which arrived this week from PropertyData, average yields last month were 6.45%, over three months they were 6.29% and over six months 6.19%.

And,as you can see from the graph, the value of transactions remains down on the equivalent period in both 2010 and 2011. Life is better than 2009! That was the bit of good news, but other than that it’s not pretty out there.

It is a little odd in some ways because there is still a wall of money (not Bank money) chasing property. If you think that the average yield is nearly 6.5% against what you can get for your cash on deposit, it could be a good time to buy. But the warnings – it’s an illiquid investment, the costs of getting in and out are high and, more importantly, the risks of tenant failure just keep rising.

The only people who are selling are those that have to.

People who borrowed back pre- 2007 are almost certainly in breach of their loan-to-value covenants, but in many cases are covering the interest payments. We are seeing more Banks working closer with the lenders to find a way out. Which suggests that the Banks think it will get worse before it gets better.

The end of the tuner just seems to get further away – and at the moment looms rather dim…

I was going to suggest ‘roll on summer’ but after the weather of the last few days, I’m not sure we can all run off into the sun?