Lift the lid on perceived widespread gloom and there are some bright spots.
The results for several major players in recent months suggest they are doing more than weathering the storm. Some look to be riding it with flair.
Success in this sector in recent years may have a lot to do with part exchanges, and it looks like those who quietly asserted that bad trading conditions might be turned to advantage, and were quick to grasp that the economic conditions could create a captive market, have been proven right. Those outfits with a dignified old school take on a market that had never let them down in the past, and felt they could safely eschew lowbrow enthusiasm for part exchanges, look to have missed out. Those who geared up for part exchanging in volume, rejigged their business models, and set up tight marketing deals with national estate agents for the part exchange resales, look to be the winners.
Those homeowners who bought in the heady years leading up to the peak have been looking to move onwards and upwards. But they can't. The scourge of negative equity means they are trapped. Unless, that is, some careful arithmetic surrounding the part exchange value/new build price gives them the key to freedom, and a new-build. Working with the builder on tailoring an incentives package might help too, but either way the model is in line with CML criteria.
Before the storm, part exchanges were relatively rare. Now in some developments they account for 70% of all sales.
This short term success may come at a longer term price - for an already struggling second hand market. The builder's profit on the new unit has factored in the "loss" on the part exchange property. The trade-ins go to market with a brief to the estate agents - to realise the stock quickly and maintain cash flow without perhaps the conventional emphasis on best possible price after considered exposure. The sequence has become slick - many part exchange properties are now forward sold - the resale has been tied up on a "conditional on acquisition" missive well before it has been bought in.
The volume of part exchanges is now at a level where the second hand market, anecdotally at least, is feeling the chilly draught as it shores up the new build sector. In some areas (typically those with an already challenged second hand market, and several national builders competing to bring new local developments online) the price of established houses continues to nose downwards at a troubling rate. The government too appears to be concerned, and it isn't clear how, longer term, a widening (and arguably artificial) gap between new build prices and the second hand market can be sustained.
What is clear however is that the same players who were ahead of the pack in appreciating the need to adapt and embrace part exchange will make the most of this market's climate change, and for them the outlook probably remains sunny.