Q&A: BUYING
Camilla Dell
MANAGING PARTNER
AT BLACK BRICK
Q. Dear Camilla, I am in the process of buying a house and my surveyor has found some structural problems. Should I be worried? Can I negotiate the price down in order to pay for these faults? At what point should I pull out?
A. You should talk to your surveyors about just how extensive the structural problems are. They will be able to advise you on the extent of the problem and what needs to be done to put it right.
Once you have got a clear idea of the work that needs to be done, then you need to get in touch with the appropriate tradesmen to get at a least a couple of quotes for the required rectification works.
Where the fault was not obvious or equally not disclosed to you when you inspected the property, then you can argue that you clearly did not take the fault – and the amount it would cost to rectify – into consideration when you agreed a sale price.
In these circumstances, you should try to reduce the agreed price by the amount that the work will cost you. This means that it is important to get quotes as soon as possible so that you can argue your case effectively.
However, you should still expect to negotiate with the vendors and you may have to meet them half way.
But in the case where you and the seller cannot come to any agreement on how much the price should be reduced by, then you should pull out before incurring any further cost on the transaction.
Q. Dear Camilla, I have seen prices rise consecutively over the last few months. Are all the good deals gone? Is it still a good time to buy and what will happen to prices next year?
A. Over the last six months, the market has seen consecutive price rises, due mainly to depressed stock levels and high numbers of buyers forcing prices up. Most experts now predict that we have reached the bottom of the market, and prices are likely to end the year higher than at the start.
The biggest limiting factor is stock. If stock levels remain low, then it is quite conceivable that prices will continue to rise, modestly as they have done throughout 2009. However, rising unemployment, and a continued lack of mortgages for people with little equity, will limit any robust recovery, and we still remain cautious.
We still maintain the view that owning a property in London as part of an investor’s overall investment portfolio is a sensible thing to do and good for diversification. Residential property is still a compelling asset class when compared to other asset classes, and while prices have risen, they still remain 18 per cent below peak levels.
At Black Brick we have seen firsthand evidence of big investment landlords holding large numbers of properties in their portfolios and managing to hold on and not sell because interest rates are so low. When interest rates finally rise, this could force a number of new properties onto the market, as investors are unable to hold on, causing prices to fall.
Whether prices will rise or fall come 2010 will all depend on what happens to interest rates, mortgage availability and unemployment. In London, once interest rates start to go back up, it is likely we may see a large number of properties come onto the market, and this could put a stop to the recent price rises we have seen over the last few months.
Camilla Dell is the managing partner at search and acquisition consultancy Black Brick. www.black-brick.com.