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What is this week's blog about?
In this week’s blog, we look at the importance of understanding and analysing market trends, particularly as a residential surveyor.
This includes what is happening to property values now and how they will change in the future, as well as what the general public think will happen.
Thanks go to Kate Faulkner of http://www.propertychecklists.co.uk/ for writing this article.
Can we forecast prices?
Property prices and rents are extremely tricky to forecast and no-one in particular, in the UK at least, has a great track record of getting them right. The last major forecasting round was pre the pandemic.
Many forecasters predicted huge falls in transactions and that this would be followed by falls in prices.
The opposite happened.
And the same happened in 2023. Forecasts of falls in prices of 10% or more were predicted, yet they hardly fell at all, ‘on average’. What did happen though was transactions did fall – from their annual average of 1.2 million to 1 million, which was quite a big drop, although some forecasters such as Savills predicted a lot less: 850,000.
Over the last 12 months, the best forecaster has been the team run by Richard Donnell at Zoopla. They forecasted falls of 5% in prices and estimated transactions would fall to around 1 million for 2023, and were pretty accurate.
But why is being aware of these forecasts important?
The reason is that they drive the headlines in the media and this in turn drives the confidence of buyers, sellers and investors, which determines how many transactions happens in a year.
And, as a property professional, it’s essential that we all play a part in educating the media, buyers, sellers and investors on the validity of forecasts, but also that for individuals, make them aware that they can actually be very misleading and worst still, lead people to make the wrong decision for their personal or professional property decisions.
So what are the forecasters saying for 2024?
For this year, the forecasters are predicting a similar year to 2023. That’s small falls in prices and an estimated 1mn sales – which is around 17% lower than the average number of transactions of 1.2 million. But, that prediction doesn’t help any buyers, sellers or investors as each one will have their own individual market and each one will also have their own reason for buying or selling. A falling market may be great for one, a disaster for another and surveyors are one of the few qualified people in the property industry who can help them make the right decision for them, based on their property – whatever is happening in the market.
In addition, what’s happening nationally ‘on average’ is of no use to individuals. For example, the forecasts below show that depending on where the property is located regionally, prices may not be falling at all, and in actual fact they may actually see some small rises.
And in reality, whatever happens regionally doesn’t matter either – it’s all about an individual property on an individual street and the only people who are independent that can deliver that information is an RICS qualified surveyor, whether it’s a price or rental income.
What about if I am working with investors?
For those surveyors that are working with investors, another factor that is rarely considered is the impact of inflation.
Data from Kate Faulkner, property analyst at Propertychecklists.co.uk shows that only around eight of the 30 cities she tracks (using Land Registry data) have actually seen ‘average’ prices rise more than inflation since 2005. Not something that people would believe if they relied on the media.
Yet this is critical information that property investors need to know and need surveyors to help them with.
How does this help surveyors secure additional business?
The media loves reporting on property prices, rents and indeed what’s happening to transactions. Being the local property expert can be extremely helpful in promoting surveyors individually or the company they run or work for.
Kate Faulkner explains: “I am regularly asked to talk about property prices and rents, but I don’t understand why local surveyors don’t put themselves forward more, for me they are the real experts!”
Why is this important for APC candidates?
Being able to interpret and analyse market trends is a key part of providing market appraisals, valuations and diligent client advice. This means being aware of hot topics and industry trends, and being able to apply these to our professional work. We cannot advise in a vacuum and being able to present the evidence, and our advice based upon it, enables our clients to make better property decisions.
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Stay tuned for our next blog post to help build a better you.
N.b. Nothing in this article constitutes legal, professional or financial advice.