Surrey - a good place to live

It’s not surprising therefore that homes in Surrey are much in demand. Indeed, apart from London, Surrey has on average the most expensive property in the UK. Of course, this is bad news for home buyers but on the positive side this also means that Surrey property has proved to be an excellent long-term investment.

Surrey People

Usually when journalists refer to Surrey they sloppily use the outdated cliche "Surrey's stockbroker belt" which refers back to the early part of the last century when affluent City professionals commuted by train from large mock Tudor houses in Surrey and enjoyed a privileged lifestyle - playing golf, (the wife played tennis) superintending the gardener and driving the Jaguar or Bentley to the local pub for a gin and tonic. Maybe this stereotype did once exist in vast numbers, but no longer, and today you are as likely to find a very different type of wealthy person living down a Surrey lane. There are pop stars ( Eric Clapton at Ewhurst, Ringo Starr at Cranleigh, Mick Hucknall at Walton-on-Thames, Brian May at West End) media celebrities (Michael Caine at Leatherhead, Judi Dench at Outwood and glamour model, Jordan, at Woldingham) and sport superstars ( Jimmy White in Cobham, Colin Montgomerie and Jamie Redknap in Oxshott, Sir Geoff Hurst in Weybridge). Lots of Chelsea Football Club players, including John Terry, the England football captain, have moved into the environs of Cobham, following the establishment of their training ground in the town. Surrey even has a smattering of royals - Prince Edward (the Queen’s youngest son) and his wife live at Bagshot Park near Woking.

The same qualities that attract celebrities (large houses in private settings and excellent transport communications with London and the rest of the world) also attract successful business people from around the globe. The ACS International Schools at Cobham and Egham (with students from nearly 50 nationalities) and TASIS The American School in England at Thorpe act as magnets for foreigners needing to buy or rent near London, but wanting to live somewhere quieter and greener. Today there are large numbers of American, Scandinavian, German, Dutch, Far Eastern, Italian (particularly at Woking) and now even Russian residents in key areas of Surrey. As a result there can be something of a cosmopolitan atmosphere, and in shops in places like Cobham or Esher you are as likely to hear a foreign accent or a foreign language as an English voice.

Towns near the M25, such as Guildford, Chertsey and Leatherhead, have grown as major business centres in their own right, and major companies have moved into new European headquarters in Surrey. The county has a surprisingly high global profile in the international computer and technology industries. Thus while once Surrey was a domitory county, whose residents had to commute to London to earn high salaries, this is no longer the case, and many highly-paid Surrey residents now work within the county.

Surrey - North versus South

KINGSTON TOWN CENTRE

Road/Rail/Air

Today we are so much dependent on the car that our daily living patterns are often determined by the road systems near our homes. Surrey enjoys some good fast roads, but as it is an affluent county, traffic flows on Surrey roads are almost twice the national average. All over the county, former quiet residential roads that can provide alternative access to towns and villages, or to key routes, are now heavy with traffic. Indeed, the junctions in such residential roads are often clogged with lengthy traffic queues during the rush hour.

The efficiency of the road network varies enormously across the county with many A roads passing through towns and villages, rather than skirting them. In general, the west and centre of the county has a better road network than the east of Surrey

The M25 sweeps through the north of the county for fast access to the national motorway network (in particular the M4,M3,M40, M1, M20,M26, M23 and M11, Heathrow and Gatwick ). Of course the M25 can become horribly conjested and is notorious for traffic jams caused by accidents and road works. The section between junction 9 and Heathrow (dual four to six lanes) is one of the busiest roads in Europe.

The M23 connects the M25 directly and quickly with Gatwick airport. The M3 cuts through the north west of the county with just three junctions in Surrey. It provides efficient access to Hampshire and the south-west of England (very popular at weekends) but its northern termination at Sunbury is often traffic-locked.

The A3 which runs out of London and south-west through the county towards Hampshire feels like a motorway with its three lanes sweeping past towns. When it has free-flowing traffic, it is an extremely good, fast route to and from London, but it is very busy in peak hours and there can be hold-ups. The newly opened tunnel at Hindhead (to be factually accurate, two tunnels) should put an end to the lengthy traffic jams that used to occur at this spot and allow the A3 to flow easily into Hampshire.

The A31 connects Farnham and Guildford via an effective dual carriageway. The A30 running along the north east borderland of Surrey is generally a quick road. The Blackwater Valley Route (A331) in the far east of the county links Camberley and Frimley with Farnham and is often mistaken for a motorway.

Nearer the centre of the county the A24 south of Leatherhead is another good fast road which travels towards Sussex and the south coast. Emerging from greater London, the A217 south of Sutton is a dual or three lane carriageway as far as the M25.

With the exception of the above roads, many of the so-called A roads are single carriageways and are not particularly quick. In general, because of the density of the population and the high ratio of cars to people, most of the north of the county is prone to traffic congestion. In the south of the county the roads are emptier, but away from the major routes mentioned above they are slower and meandering; it can often take an unexpectedly long time to cover a relatively short distance, especially in the Surrey Hills. Many villages in the south do not have quick access to fast roads.

Rail Communications

Price falls - some myths laid to rest

Do not be misled into thinking that property prices in Surrey are immune from falls or even crashes. In the last property slump (1988-94) prices fell as dramatically here as elsewhere, disproving the myth that the rich are somehow protected against economic downturns or hikes in interest rates. Instead, in the 1989/91 debacle it was obvious that much expensive Surrey property had been bought largely with borrowed money and many swanky homes in prestigious locations such as St George's Hill were repossessed by the banks. The current market collapse has likewise affected Surrey and property prices have tumbled. A lot of the recent boom was fuelled by high-earning employees in the financial industry and the shake-out in the City has had negative effect on Surrey's house prices.

What’s the market doing now?

9th January 2012

It was no surprise to anyone that the Surrey property market in December was exceedingly quiet. The final month of the year is normally and understandably a very subdued one, with few sales and even fewer new instructions, and this year was no exception. Estate agents were able to tidy their drawers, send corporate cards and enjoy their office Christmas parties at leisure, although given the grim economic outlook, the festive cheer was rather muted.

The few sales that were agreed in December were achieved through serious effort on the part of agents and realism on the part of vendors. Indeed, realism has become the new template for the market, with agents attaching all their hopes to this word in the expectation that it will be a kind of talisman to see them through the vicissitudes and challenges of the next twelve months. After all, realism is a far more attractive and positive concept than that of falling prices.

Amid the quietness of the December market, some agents were able to busy themselves with valuation sorties to properties whose owners are looking to sell in the new year. Meanwhile a number of unsold properties were withdrawn from the market prior to the festive season, no doubt destined to reappear on agents' lists in 2012.

Prices

Since there was such scant market activity in December, there is little significant comment to be made on prices achieved, bar the fact that almost without exception prices were very negotiable. The only exceptions (and this has been true for many months) were those homes occupying outstanding locations in the most desirable areas and with near-perfect accommodation (in terms of number and size of rooms and the layout). When such properties come to the market, buyers recognise the rarity and will often pay above the asking price to secure such special homes. Unfortunately, agents can't always identify these houses and will often put high valuations on lesser properties in the hope that buyers will pay a premium, and in boom times they will, but not in the current weak market.

The Future?

The first few days of 2012 brought wild winds to Surrey, toppling many of the county's mature trees. Could this be an omen for the property market this year? Indeed, the outlook is bleak - as we have been forecasting for some time. The general economic background is full of woe and has been exacerbated by the eurozone crises. The decline in mortgage availability which has been a problem for the property market since the banking crisis of 2008, but which was starting to improve last year, looks set to deteriorate further in the coming months because of a general shortfall in bank funding, caused by eurozone debts. With wholesale funding sources drying up for banks, money for mortgages will be in short supply.

Normally, the property market in Surrey gets off the blocks swiftly in January with first-time-buyers, eager to purchase before prices rise in the spring, but as in recent years, ftbs will be in short supply in 2012, despite the fact that prices at the bottom of the market have fallen considerably. For most fibs it is not the price of property that is now the biggest hurdle but the need to amass a large deposit to access the limited supply of affordable mortgages. Moreover, the impetus to buy in order to beat price rises is likely to be replaced by a wait-and-see approach in the expectation of further price falls. Caution and uncertainty are likely to characterise not just the ftb market but the market in general.

However, the ending of stamp duty relief for ftbs on properties up to £250k may well inject some motivation close to the deadline of March 25th, but probably only amongst those who are already well on the way to purchasing a property. As noted above, many would-be ftbs are likely to wait to see if prices will drop further, a tactic which could easily produce greater savings than the avoidance of the 1% stamp duty.

A more important positive influence on the market in 2012 will be the ongoing, historically low Bank of England interest rate which seems set to remain the same as long as the country's economic woes continue. Low mortgage rates for those with substantial deposits will allow the market to avoid total stagnation and for affluent, confident purchasers to secure the best properties.

No one has a crystal ball to predict how the eurozone crisis will play out, or how bad things will be before they get better. Certainly the UK economy looks as if it will experience tough times for the first half of this year at least. Further down the line, inflation is expected to fall later in the year which should have a beneficial effect on personal finances. But once the economy starts to pick up, then interest rates will begin to rise and this in turn will have a negative effect on the property market. On the other hand, there is a huge amount of pent-up demand for property purchase which has built up over the last eighteen months and once this is able to be released, the impact on prices is likely to be very significant. Yet, it is hard to see when financial and economic conditions will allow this pent-up demand to be released and to be met by sufficient mortgage lending.

Overall we predict a very weak market in the coming months. Indications are that there will be a large influx of new instructions coming to market unusually early in the year, adding to what is already an exceptionally strong supply of homes for sale. With few serious buyers around, most homes will remain unsold and prices will fall, with the exception of the best of the best houses in each price sector. Turnover will remain low, but if vendors can refrain from being greedy, sales will take place. In line with 2010, the best performing sector of the market is likely to continue to be good family houses, in the best locations priced under £1m.

As always, buyers should exert caution in assessing the value of a property. A house or flat is only worth what someone is willing to pay for it at a certain time and if affordable funding is available.

We were mostly right - apart from interest rates!

As always at this time of year, we look back over the previous twelve months to assess how accurate, or otherwise, our monthly predictions have been. As usual, we were more right, than wrong, although like nearly every other professional commentator we did predict that the Bank of England interest rate would have to rise from its historical low of 0.5%. Back in January 2011 we said that "before long" interest rate "must rise" and we continued saying much the same for many months - but the rate has remained unchanged to this day!

Our predictions over the year were also for a weaker market than the various house price indices have recorded. The Halifax has recorded a fall of only 1.3% over the year while Nationwide has recorded a rise of 1% (both indices for the country as a whole). The Land Registry whose statistics just go to November, shows a price fall of only 0.6% for Surrey. Yet, at Surrey Houses we know of many price falls of 10% and more, and of many homes that have failed to find buyers over the year. Moreover, official statistics reveal that the number of sales in Surrey was very low last year. So what really was happening in 2011? How to explain the discrepancy between the price performance statistics and the experience of vendors?

Part of the explanation is that, given the straightened times and mortgage restrictions, it has been the most affluent who were buying and they bought the best properties, not the cheapest. Another explanation could be that agents put inflated valuations on properties (i.e. higher than the previous year) but have then dropped the price to get a sale, so the selling price was not much different from the previous year's. Furthermore, the indices only record sales (or for the Halifax and Nationwide, only agreed sales, not completions). They ignore all the houses languishing on the market unsold. Evidence of real price falls in Surrey can be found on the property website www.propertysnake.com.

Looking back at our monthly forecasts, in December 2010 we predicted that, "It is unlikely that the property market will wake up with a flourish in January". We went on to say, "We anticipate that next year there will be a demand for the best homes in the best locations, but it will very much be a two-tier market and sales will depend on realistic pricing from both agents and vendors."

In January we continued to predict a "declining market." "Prices for the best properties are likely to hold firm .......the best houses in the best locations (the areas of the county that are already the most expensive) being in demand and experiencing little change in prices, but in contrast most of the property for sale in 2011 will fail to find buyers and there will be a substantial drop in prices (around 10% in the lower reaches of the market and up to 25% above £1.5m." In fact, many prices at the lower end have fallen by more than 10%, while falls of 25% above £1.5m though they have existed, have been few in number, falls in this price sector have more typically been around 15%.

In March we forecast that that there would be "no spring revival - sales will be historically low and will not constitute a proper market rally.... At the upper levels of the market, overseas buyers will make more of an impact." Both these predictions proved accurate.

In April we anticipated that the royal wedding would create a "slowdown in activity" during late April and early May. "After that we can expect the market to just tick over, with the very best properties in the best locations finding buyers but not at very inflated prices, while the majority of houses for sale will fail to find buyers and consequently prices will fall back." Again, this is what happened. Agents reported a slump in activity in the normally busy April/May period and after that the market continued to be relatively quiet.

In May we commented that " the feel good factor of wonderful weather, double Bank Holidays and the royal wedding was deceptive" as we continued to predict a falling market.

In June we posted that, "new inflationary pressures - including energy and food prices will further decrease people's finances and consumer confidence". From then on, until the end of the year, our predictions followed a monotonous pattern as the market itself settled into a dreary, plodding mode lacking in fireworks. We did though predict two positive trends, "the re-emergence of the buy-to-let investor and overseas buyers at the top of the market", but this was really an attempt to counter our doom-laden comments with some notes of cheer regarding minor trends of activity in an otherwise quiet market.

In July we expected that, "sentiment to deteriorate further in the autumn because of mortgage retractions and the need for large deposits." However, "discerning buyers will largely maintain the prices of the best houses, despite the very limited demand for property purchase over the market as a whole.... we expect to see bigger falls for the less desirable homes".

In August we anticipated that, "the latest global financial chaos will undermine confidence generally as we move into the autumn months....there will be a glut of homes for sale and prices are likely to fall in general, especially in the less affluent areas."

In September, we were not expecting, "a strong autumn market. We anticipate that the market in Surrey will slow further and vendors will either withdraw their properties or lower their prices... For those who have large deposits to put down, the low interest rates available to them make property purchase affordable and these buyers will help keep the market ticking over, again bolstering prices in the best locations while values in the less affluent parts of Surrey will continue to fall."

In November, we stated that, "hardly any glimmer of light in an already gloomy Surrey property market," and our comments about the bleak prospects for the Surrey property market made the headline news on BBC Radio Surrey and resulted in two radio interviews.

Now, as we move into 2012 we believe the bleak outlook that we have been forecasting and then experiencing, especially in the latter months of the year, will become increasingly self-evident.

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