‘Don’t wait to sell hoping for a higher offer’
Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors, gives Candice Krieger his views about the housing market
Homeowners shouldn’t wait to sell in the belief that they might get a higher offer in six months’ time. That is the message from the chief economist of the Royal Institution of Chartered Surveyors (RICS).
Simon Rubinsohn, who has presided over RICS for 15 years, told Jewish News: “It’s dangerous to hold on to the notion that prices might be higher in six months. If you are looking to sell, I am not sure there is a great advantage in holding back.
“If you get locked into believing your property is worth x amount because someone once sold something on your street for x amount, that isn’t how the market works.”
The sluggish state of the UK housing market has been hitting the headlines in recent weeks. Buyer demand and agreed sales continue to fall sharply in the face of higher mortgage rates and economic uncertainty. In the rental market, while there has been a sustained uptick in demand, the yawning gap between this and the lack of supply remains close to an all-time high, according to the RICS Rent Expectations indicator. This imbalance has sent rents rocketing.
“The whole property market is pretty dysfunctional at the moment,” says Rubinsohn, a member of Finchley Reform Synagogue. “There is definitely a supply challenge where we haven’t built enough homes across all tenures, and then you throw in the macroeconomics. I don’t think people ever thought we would see interest rates move in this way and they have been caught out and forced into a much more challenging economic environment.
“So, there is the cyclical overlay on the structural.”
Rubinsohn, who entered the financial services industry in 1985, concedes that the current situation is “a crisis in some sense”, particularly how it is playing out for young people who either want to get a foot on the ladder or rent.
“The deposits required in London, the Southeast and other big cities around the country are huge, plus the higher interest rates and running costs of a mortgage, but it’s that deposit which is the big difference. It used to be that on a relatively normal salary you could find the wherewithal to get a deposit together, but now, without the bank of mum or dad or grandparents, it’s very hard to get a deposit together.”
A father of two, Rubinsohn says it’s also challenging for those looking to downsize. “There is a lack of these sorts of properties, so they are likely to be priced quite aggressively even in this market. And again, it’s dangerous to think prices might come down. The place you want to move to is probably reflecting the general market tone and you shouldn’t get too fixated on what’s going to happen over the next 12 months.”
So what is going to happen? “I would like to say things are going to improve as we head into the autumn but unfortunately that’s a little premature and it might be that we are looking through into 2024 before we get some visibility on the likely turning point.
“Realistically, interest rates are not going back to where we were so when buyers think about their finances, they need to plan around the higher cost of money being embedded in mortgages.
“It’s a different environment today. We are dealing with mortgage rates that are higher than they have been for an awfully long time.”
Rubinsohn says the recent decision by the Bank of England not to raise interest rates is “a sensible one in light of the latest inflation data”, but he still doesn’t expect an early reversal of course on interest rates. “The housing market is likely to remain flat for a while to come.”
Rubinsohn joined RICS in 2007, having previously been a senior strategist for Barclays Wealth, where he played a key role in managing client asset allocation.
A former lecturer in economics, in 1985 he joined ANZ Merchant Bank as a UK economist.
He says there needs to be a holistic approach when it comes to easing the imbalance in the market.
“Some of our [RICS] members are saying is the answer to roll back on some of the taxes and regulatory measures that discourage landlords, but I’m not sure that’s the long-term answer.
“These buy-to-let landlords are competing for properties with first-time buyers, so they’re not adding to the sum total of properties, they’re just switching between tenures.
“Whoever is in power really needs to think about a bipartisan approach and about a long-term strategy in terms of how we approve developments.
“We need to be mindful that more property is required, but we don’t want to rip up the whole Green Belt, so we need to think about it holistically.
“The government has a role to play in trying to convene lots of relevant parties and stakeholders. It can’t pull all the levers on its own.”
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