Gazumping is back in the English capital, according to the latest survey from the
Royal Institute of Chartered Surveyors (RICS). As house prices rose for the
11th consecutive month, at the fastest pace in four years, it would seem that
estate agents and sellers are reaping maximum profit through the practice of
gazumping.
The survey confirms that conditions are ripe for gazumping, with house prices rising and demand from buyers continuing to outstrip supply.
RICS estate agents have reported that price rises are being driven by the
limited availability of property, with 45.1 per cent of chartered surveyors reporting a rise in house prices for September, up from 34.9 per cent in August.
Jonathan Cornell, technical director at Hamptons International Mortgages, comments: “We are seeing a few cases of gazumping among London’s mid to high property. With a lack of property stock and city bonuses fuelling the demand, vendors have realised
they are in an advantageous position.”
Andy Pratt, chief operations officer at Alexander Hall, agrees
: “There are simply not enough residential properties to supply the market, which has experienced increased
competition among consumers.”
The ripple effect
Although gazumping currently remains confined to London, the RICS survey states that house price increases in other parts of the country are led by the capital and the South East, which leads to the question: could gazumping have a ‘ripple effect’ for the UK?
Richard Sexton, business development director at e.surv, suggests that while gazumping
is happening in the London market, the spread will depend on whether house prices continue to rise.
He says: “Over the last 15 years, we’ve seen that what happens in London tends to then effect the rest of the country. However, if external economic factors change and interest rates or unemployment figures rise, a dampening effect would take place, halting the gazumping process altogether.”
On the other hand, Paul Smith, chief executive of haart estate agents, believes the suggestion that gazumping has returned to parts of London only serves to frighten homebuyers and encourage unscrupulous practices. Smith admits buyers still remain price sensitive and overpriced properties simply will not shift.
He says: “The high salary levels and huge bonuses in the city are undoubtedly
having an impact on the housing market in the most prestigious areas of
London. However, our estate agents believe that gazumping is almost negligible in
the majority of areas. We have experienced only a very small number of cases
in the last few months and have not seen an increase.”
Consumer response
For the London market, the importance of securing an offer and completing as soon as possible is particularly important if gazumping is to be taken out of the equation. Luckily for the consumer, more and more lenders are becoming aware that speed of service can be a deal maker and new technology such as automated valuation models (AVMs), as well as flexible underwriting criteria can make a huge difference.
Cornell admits that one knock-on effect of gazumping has been that customers want to tie up property and mortgage deals quicker.
He says: “If they have found a property and need to exchange, one of the biggest
factors in choosing a lender is speed and efficiency. Of course the rate and
the underwriting criteria are important, but there is no point getting someone the
best rate if they are going to lose the property they want.”
Pratt also believes consumers buying in London are aware that other buyers may come in with a better offer, even if theirs has been accepted. His recommendation is that in order to counter the possibility of being gazumped, it is advisable that a client has their finances in place before they even make an offer on a property. Pratt says that if a consumer goes to see a broker at the initial stages of looking for a property, it will save time once they want to proceed with the buying process.
A double-edged sword
While gazumping may seem an unfair practice, the news is that it is an inevitable side effect of a healthy UK economy should allay some fears. The buoyancy of the economy will dictate whether it will continue and grow or go into hibernation. Either way, gazumping will always be present in the housing market when the economy is strong. The only things that can stop it for good are the government and the introduction of new legislation preventing the practice.
