Last month, my estate agency, Portico, was in the press for saying something rather controversial: we could be on the verge of another property market crash.
We’d seen London sales volumes approaching a critical level, and believed a potential price correction was likely to follow as a result of the recent decline in transaction volumes across London.
With anything a little against the grain, these comments sparked a reaction. While some said they thought it was “refreshingly honest hearing candid views from an estate agency”, others believed we were “saying something frightening” to attract attention.
We certainly didn’t say it for reaction, so I thought it best to explain why we did 'call the property market'.
As an agent, we tend to take a fairly analytical approach and spend a lot of time crunching numbers. When preparing for our Winter Market Update, we noticed that sales volumes in prime central London had fallen dramatically in recent months.
London is perhaps no longer the playground of foreign investors, who are now looking on the market with an increased sense of caution due to slowing price growth, tax burdens and the strengthening pound.
Interestingly enough, just after we published this statement, Property Supply Index and Righmove published research to show that property listings have fallen across the UK portals too, with new property listings on Rightmove plummeting by 21.5 per cent across the UK in November.
What is even more interesting, is that when we looked more closely at the data, we noticed that the current market conditions starkly echo those of 2007, where house prices began to crash at the point when transactional volumes hit half of the pre-banking crisis levels.
In fact, Westminster – the epicentre of London – has already experienced a 50 per cent reduction in transactions over the past 12 months, which is precisely the point at which prices started to drop in the 2007 crisis.
But statistics aside, it’s clear for everyone to see that something has gone wrong in the housing market. House prices are already 43% higher than they were at the peak of the previous housing crash, and many are in the position where they are renting a property they could never dream of buying.
I work and live in London, and love everything about the city, from the stunning architecture, to the variety of pubs, bars and restaurants, to the sheer amount of art and culture available; but London only works when it works for the people who live and work here, which is why it’s so important to have a housing market that functions for the majority.
While it’s unusual for an estate agent to 'call the market' - in the same way that turkeys don’t vote for Christmas – I truly believe a price correction would be better for London as a city, and though painful in the short-term, it might also be better for estate agents in the long-run.
*Robert Nichols is Managing Director of London estate agency Portico