One of the interesting features of the island’s unique two tier housing system lies in watching the respective fortunes of the Local and Open Markets and how the dynamics of both can be affected by their interaction. Quite often they can be seen as operating quite independently of each other until such time as the shrinking differential between prices can cause one to re-adjust to the other. This may be of particular significance to licence holders, who can be seen to represent a ‘third tier’ of the island’s property market, and can ultimately introduce a pressure release valve if local market house prices threaten to overheat.
The current state of both markets presents a good illustration as to how this can work in practice. Despite recessionary pressures, the local market has continued to demonstrate an extraordinary resilience with average house prices continuing to increase at a rate that is close to inflation. At the same time, the lack of demand for Open Market property which has seen the number of sales slump to less than 50% of the long term norm and has resulted in decreasing values that are proportionate to a vendor’s need to sell. This is particularly felt in the price range up to £1.5 million.
In effect, Open Market property has become more affordable to licence holders – as well as guaranteeing them an island home for an unlimited period. This means that we should be moving into a time when we see more of them choosing to buy into the Open Market rather than exercise their option to buy a local market home and add to house price inflation in that sector of the market.
It is also worth making the point that there are a number of fully qualified local people who own and occupy Open market property out of choice. This may be for particular reasons of location, position or style but more likely it’ll be for relative value. Not just as a result of the markets moving closer together but also because, in the higher price ranges, it’s logical that there’ll be more demand for Open Market houses at £2million plus than there will be for Local Market ones. While dealing with this subject it’s worth killing off a popular misconception; there are no restrictions on a local person buying and occupying an Open Market house and doing so won’t affect their ability to move back to local market accommodation in the future.
At this moment, Open Market property represents better value than at any other time in recent years and has a greater potential for capital growth. Looking at some of the competitively priced listings, there would be an argument that the values of the two tiers of our housing market have never been closer – and never been a better time financially for licence holders to buy into the Open Market.