Room At The Bottom In Swansea

[FDR]

I've been looking at the Swansea housing market for a while now as a FTB looking to buy towards the back end of 2011. I'm looking at places les than £100K. In some cases quite a lot less as I cant really justify spending much more than £70K. Ten years ago it seems I could have had my pick of properties at this price point, but these days it's pretty slim pickings. Looking at the rightmove stats I can see that the volume of sales has fallen rapidly this year but the average price shows little indication of taking the dive that one might expect given the public sector job losses in the area and the general state of the economy. Most of the people I know who have bought in the last five years seem more than happy to ride out any reduction in price as Swansea is the graveyard of ambition and they have no need to go anywhere anytime soon.

I imagine most of the properties that I'm looking at are owned by FTBers and that many of these bought on near 100% or interest only mortgages. Certainly that's the impression I get from taking a sample of the people I know in Swansea (although I think I've seen a few probate sales at my price point). This being the case, I would imagine that even if there is a correction in house prices in Swansea, there isn't much room for the very cheapest properties to get any cheaper. People just won't be able to afford to sell as there's no equity and as Swansea is quite a comfortable town for those that have settled here there's very little urgency for sellers to sell.

So my question is this; a correction in house prices seems inevitable, but for the cheapest properties in Swansea will this be mostly expressed as a significant and protracted reduction in sales volume and not as a reduction in the price tag?

[The Masked Tulip]

At best, according to the land reg, houses are getting 91% of asking price so that 100K is 91K. That is before the anticiapted falls of 5% to 10% in 2011.

If you take 5% off the initial 100K and then offer no more than the 91% UK average your 100K house - let's keep this simple - is roughly 85K. Take the 10% drop in price and then 915 and you are getting nearer to your 70K price that you can afford.

In the 1990s' crash loads of people ended up handing back their house keys to the building societies as prices plunged - a year earlier people were adamant that house prices would never crash.

Edited January 3, 2011 by The Masked Tulip

[Swansea Estate Agent]

I think TMT has it about right.

Over the past 4-6 months we have been receiving offers around 30% below asking prices for those very reasons.

The problem is like you say FDR. Many vendors have bought high and/or have 90-100% mortgages, so they are unable to sell for the prices offered. If you are in a position to purchase at auction or you can purchase a repo, then you will have many more options available.

I have been watching quite a few auctions lately and the investors on our books have been able to buy at prices they have hoped for. The repo's are a little harder to come by though. You could wait for the estate agent to put an ad in the paper stating that an offer has been accepted and you have a certain amount of time to make an improved offer, but this could obviously lead to a bidding war.

Most EA's do not seem to advertise these type of properties too widely, so that they can sell to their own investors which usually leads to fast sales and the property being returned to the EA to let out and possibly manage.

It's probably an idea to register your details with a few EA's in an attempt to get early notice of these properties. I would suggest that you try to build a bit of a bond with the EA's though and contact them on a fairly regular basis because many will just put your details in to the system and forget about you, so you will just receive notice of some properties rather than the ones you would be interested in. Better still I would siuggest calling in to the offices to have a long chat with the EA's. Some will give you their time, so it's worth trying a few of them.

'So my question is this; a correction in house prices seems inevitable, but for the cheapest properties in Swansea will this be mostly expressed as a significant and protracted reduction in sales volume and not as a reduction in the price tag?'

Probably a reduction in sales volume, but there will be more properties falling into your price range.

We are still finding property to sell for 40-50k and some of them require little if any work although if you are prepared to do some work on a property, then you will have many more properties to choose between.

Are you buying to invest or is it to live in?

Edited January 3, 2011 by SwanseaPropertyAgents

[FDR]

Thanks for the replies.

I'm looking for a place to live in, not invest. As a single bloke who spends most of his time at work all I really need is somewhere to sleep and cook food in the evening (sounds sad doesn't it ). I've had enough of renting and would now like a permenant base of opperations - hence I think it's probably time to buy a house but I've no appetite whatsoever for spending any more than I absolutely have to.

I think the example you give, TMT, is sound. However, although you and I know that it should be a buyers market this year I think many people are taking a while to catch on! I suspect that interest rates are going to have to rise before the volume of distressed sales takes off and people start to realise that their house is only worth what someone will pay for it. Sadly, I suspect that 2011 will be a year of continued low IRs.

As for EAs churning the cheap properties through investors and reaping the rental fees, I've always suspected that I'd need to get on the 'inside' to get a good deal. I'll take your advice and try and have a bit of a conference with with an EA sometime soon.

We are still finding property to sell for 40-50k

Yeah, I've seen a few of these around Swansea and I've noticed that there seem to be more properties going to auction in the last year than has been the case historically. I'm quite prepared to put in some work on a place as my priority is to spend as little as possible on housing so that I've got plenty left each month for getting rich on through other investments!

[Swansea Estate Agent]

Thanks for the replies.

I'm looking for a place to live in, not invest. As a single bloke who spends most of his time at work all I really need is somewhere to sleep and cook food in the evening (sounds sad doesn't it ). I've had enough of renting and would now like a permenant base of opperations - hence I think it's probably time to buy a house but I've no appetite whatsoever for spending any more than I absolutely have to.

Yeah, I've seen a few of these around Swansea and I've noticed that there seem to be more properties going to auction in the last year than has been the case historically. I'm quite prepared to put in some work on a place as my priority is to spend as little as possible on housing so that I've got plenty left each month for getting rich on through other investments!

We have several landlords looking to sell their portfolio one property per year to avoid tax and many of the properties are not advertised. I would assume other agents have many of these on their books too.

If it is somewhere to simply put your money into a mortgage rather than rent, then the best I could offer is a 2 bed ground floor flat in Plasmarl which the vendor may accept £40 - 45k. This property would easily let for £400 pcm in the condition it is in now, so maybe if you lived their and slowly carried out modernisation work, then you could achieve £450 pcm which would give a healthy yield to you or to a future investor which would make it a good property to offer to investors in a few years time. A mortgage on this would not be too expensive.

You may find other property in other areas are more spacious or in a better condition, but they are not that easy to find. We have a few properties like this that are currently tenanted and the vendors would be happy to sell. We are unable to put them on the open market though in case the tenant decides to leave, so we just offer them to investors, so that they can purchase the property and keep the tenant in place.

This is where a lot of people miss out. We do this because it is what the vendor requests when they instruct us and is simply for the above reason regarding the tenant. Maybe if you visit the EA's you should ask if they have tenanted properties which would be available to purchase. Even if you are not investing the property will be available for you to purchase.

Problem with going to auction is that you need to have the funds already in place.

Edited January 10, 2011 by SwanseaPropertyAgents

[FDR]

Well, I've been watching RIghtmove these last few weeks and there's now a load of stuff on between £60k and £75k. Just what I'm looking for!

Seems that in this bracket the offers the EAs are reporting are between 3 and 5% below asking price. Seems things are starting to go my way. Still not in any hurry though, it'll be the end of 2011 / begining of 2012 I'll be looking at buying with about a 15% deposit.

I'm also noticing a load more for sale signs around the place, maybe there's more to come?

[Swansea Estate Agent]

Interest rates will rise soon and when that does you may find many investors stop buying property and once again return their money to the banks for interest.

Once that happens you will have your pick of affordable properties.

The increase in rates will also force money home owners to hand over their properties due to not being able to afford the mortgage repayments and I can guarantee that many many landlords in Swansea will lose their properties for the very same reason.

There are a massive number of landlords that are safe with low interest rates because the rents are covering the mortgage repayments, but once they have to add money from their own pockets to cover the mortgage, then they will have no choice other than give back the property(s).

More sale signs will be going up and we are getting lots of valuations this month. Some for the above reason to get out before they are forced and there seem to be quite a few that's being tempted with the part-ex deals.

[The Masked Tulip]

I know it is not your price point but has anyone else noticed a huge influx of 300K to 900K houses coming on the market in Swansea since the start of the year?

There seems to be a rush to sell in the 300K to 600K market all of a sudden in places like Mayals, Caswell, Langland, Bishopston, etc. These coming on the market - although ludicrous and unaffordable asking prices are making a lot of long-term 'tat', IMPO, look even more over-priced.

I mention this because it looks like there is a panic amongst middle to senior management types in the city.

SPA is correct - the interest raise rises will kill the Swansea market and I expect to see those 100K to 200K houses falling dramatically in asking price this year.

It looks, touch wood, as if it is kicking off in Swansea now. What a glut of property for sale.

[Swansea Estate Agent]

Not looked at the higher end stuff simply because we don't really deal with it.

The launch of these new branches by EA's will have something to do with it. I bet the EA's have been going door to door trying hard sales tactics to get many signed up.

One of these sales can cover 5 or 6 sales with regards to commissions. It is a numbers game for most EA's after all.

We have not had any valuation requests through the portals although we have property for sale in every postal code, so I would assume these leads are coming direct to the agents.

Maybe it is just a case of people trying to sell for as much as possible and starting again if/when prices drop further. When somebody puts their house on the market it sometimes makes those nearby take notice of what their house is worth.

[The Masked Tulip]

Good point. Someone might be living happily in a house they bought 10 years ago, have a nose at the price the house down the road is asking, when they stand up after falling over they decide they want some of that for themselves.

There is an awful lot of property on the market at the moment and a few EAs are telling me that March is their busiest month for valuations.