Living it up

Just as the residential property market across the UK regions varies, so does that in Jersey and Guernsey. But, as Fiona Nicolson discovers, the outlook is looking up for both

Property markets thrive on confidence, which has admittedly been in short supply over the last few years. But not only is the housing market picking up in the UK, there are signs that confidence could be making a comeback in the Channel Islands, too.

Statistics reveal that the latter half of 2013 certainly had an encouraging feel to it. The number of houses sold in Jersey jumped to its highest level for six years, according to the most recent Jersey House Price Index figures available (for Q3). Property prices also rose by three per cent, compared to the previous quarter, with the mix-adjusted average property price standing at £408,000.

Guernsey's property market looked brighter too. According to Guernsey's Residential Property Prices Bulletin for the same period, the average purchase price of local market properties was 4.4 per cent higher than in the previous quarter at a mix-adjusted average of £465,008, although there were five per cent fewer transactions. There was also a marginal increase in transactions of Open Market prices, although average prices were down.

On the whole, the statistics bring some welcome news. But do they represent a meaningful improvement or just an upward blip?

Slowly, but surely
Despite Guernsey's rather mixed results, Simon Torode, Founding Partner of estate agents Livingroom, believes the island's property market is buoyant. “In September last year alone, we sold just over £25 million worth of property, including the highest price ever on an Open Market property in Guernsey, which sold for more than £8 million. Every sector of the market is selling, too,” he says.

Torode agrees that the picture is not entirely positive, however, adding: “The volume of sales in 2013 is down because banks are being cautious about lending. Another major factor is that people are deciding to stay where they are and renovate their property. However, this bodes well for the sale price when they are ready to put their property on the market.”

Sales in Jersey are also spread across the price bands. As Gavin Renault, Property Practice Area Manager at law firm Mourant Ozannes explains: “The upper end of the market has been more buoyant, but a wide spectrum of properties are selling.”

Significantly, purchasers include first-time buyers, and Renault claims that the States of Jersey's Deposit Loan Scheme has helped the market pick up a little too.

Launched in July 2013 on a six-month pilot basis, the government-backed scheme was available to first-time buyers who had saved a five per cent deposit. The scheme lent them a further 15 per cent, with the remainder being borrowed from a private mortgage lender. The pilot finished at the end of January, and at the time of going to press was being reviewed for its success and impact. A decision about whether the scheme will be extended or not will be made following the review.

Looking ahead, Renault anticipates stability in the market. He does point out, however, that bank lending is key to improve sales. And this help could be on its way, as he adds: “I have heard from some lenders that they plan to lend more in 2014.”

He concludes: “ I would describe the current residential property market as ‘business as usual', but with some improvement on the way. It's all about making it easier for people to access the money they need, rather than creating new laws and schemes. So, if lenders stick to their promises, 2014 could be a much better year for the market.”

‘Sweet spot'
Julie Melia, Partner and Co-head of the Property Law Group at law firm Ogier in Jersey, believes there are a number of factors that have contributed to an improvement in the property market in both islands.

“The Deposit Loan Scheme has helped Jersey,” she agrees. “People may also be realising that this period could actually be a ‘sweet spot' due to low prices and low interest rates, which might no longer be the case in six months' time, so they're now starting to buy.”

Melia also takes the view that property market activity in the UK may be a factor in the recent upturn, with the improvement in the market in the islands being a reaction to the positive news filtering through from the mainland.

Other factors are having a detrimental effect, however. Property development in the Channel Islands is not as vibrant as it could be, which Melia attributes to bank lending. “There is a problem with new builds as developers are still finding it difficult to get finance,” she explains. “Dandara is an exception to the rule, but small- to medium-sized developers are finding it a challenge to obtain funding.”

Despite this evidence of signs of new life, Melia emphasises that the market is not as healthy as it could be. “We are still in a recovery stage – we are nowhere near back to where we were,” she stresses. “There will hopefully be a gradual improvement, and I don't foresee any radical alteration to the market, unless there is significantly bad economic news. Confidence builds on confidence, though, so the current mood should continue.”

Banking on it
While banks are often criticised for hampering growth due to lack of lending, Nigel Pascoe, Director of Lending at Skipton International, is of the opinion that they have played a significant part in revitalising the first-time buyer sector in Jersey.

Skipton is the only approved mortgage lender for the Deposit Loan Scheme, which Pascoe describes as a very successful project. “It has helped many younger people get onto the property ladder who would not otherwise have been able to,” he enthuses. “A deposit is normally 10 per cent, so on a property valued at £300,000, you need to find £30,000. That's a lot of money to have to save up, and it can take some time, so the help that the government has provided is of enormous benefit.”

Pascoe's wish list for the property market in Jersey and Guernsey in 2014 includes more of a focus on specific property sectors. The States of Jersey's Housing Assessment for 2013 to 2015 indicates that two thirds of first-time buyers want to buy two- or three-bedroom houses, and Pascoe believes this should be addressed.

“There have been lots of apartments coming onto the market, but many people prefer houses. People like to sit outside in their gardens and have a barbecue, which you obviously can't do in a flat,” he says. “More availability of these properties could further encourage the first-time buyer market.”

Pascoe also agrees there's more of a ‘feel-good factor' in the property market at the moment. “In the last quarter of 2013, there was much more optimism,” he says. “Prices have levelled and many have seen this as a good time to enter the property market. All of a sudden, people who had put off buying are now looking. I believe people are more confident about 2014. I don't see a return to huge activity and volumes, but I'm quietly optimistic that the market will improve in both Jersey and Guernsey.”

Summing up, it seems that confidence has returned, but remains cautious. Time will tell whether increased bank lending, an extension of the Deposit Loan Scheme and continued good news about the UK property market can revitalise the Channel Islands' property markets in the longer term.