Market has crashed...say Foxtons?

What’s interesting about Foxtons, is that prior to becoming listed on the Stock Exchange they were able to keep any disappoints on profits relatively quiet and behind closed doors.

Well, this has now changed. With Foxtons listed on the Stock Exchange, they are perhaps able to provide one of the most telling pictures not only concerning themselves (as one of London's largest agencies) but also on the London property market.

Foxtons have released today that things are looking suspect in the market place as their shares have taken a turn for the worse.

Foxtons have pointed to “external headwinds” of “political and economic uncertainty, tighter mortgage lending markets and mismatches between the price expectations of buyers and sellers”.

Jeremy Jacob’s take on this is that the market is being cautious. The “economy is back” talk has been wonderful to hear, but we are all being careful. We shall not see any dramatic property value rises that we had seen pre property crisis 2007 anytime soon. Stabilisation is key. Interest rate increases have been teased and toyed with but realistically they cannot rise until wage inflation is battled. The suspected market wobble may now be taking effect. However, Jeremy Jacob maintains that sustained growth will emerge from it after a short period.

So property investments continue, but they are done with good research and careful consideration (and more favourable opportunities provided for those with higher deposits). The purchase price vs the rental yield is assessed more than ever before by a prospective buy-to-let investor. Properties can appreciate in value better than can offer an attractive rental yield and it can certainly work vice versa.

Anthony Codling, a property analyst at Jefferies has further commented on the lettings markets; "if sales aren’t going through, then your lettings market should be stronger”, he said. “So my real surprise is that lettings aren’t stronger”. Good question? Jeremy Jacob observes some things in the lettings market in Kensington and Chelsea:

1. High net worth and company Landlords can afford to leave their property vacant until their asking price expectations can be met (particularly with the Prime Central London market).
2. There are Landlords who rely on monthly mortgage payments being met, and therefore need to ascertain an appropriate rent. Could it sometimes be out of sync with the correct market rent? Sometimes…..
3. There is a large amount of competition amongst properties on offer to rent, as under 50% of properties in Kensington and Chelsea are owner occupied. That’s a lot of properties to rent in RBKC.
4. The disparity and range of property quality vs asking price. Landlords who invest in producing a high specified property will generally succeed in commanding a rent premium. Those that don’t, are battling in a saturated market place.
5. Tenants are savvy in this current market, they view a range of properties and are armed ready to negotiate.

It is of Jeremy Jacob’s opinion that Landlords and Tenants that are able to understand each other’s respective viewpoints/position and can work to agree a happy compromise - perform as the biggest winners in this current market place.