So, we have another General Election on it’s way in around 7 weeks time, three years earlier than expected.
It is an old adage in the financial world that markets don’t like uncertainty, but what effect is the news having on the local housing market – and how will the campaign affect the behaviour of buyers and sellers in the run up to the summer?
In short, we think very little change. There may be a reluctance amongst some vendors to put their property on the market until the Autumn when the election and summer holidays will be over. However, that in itself gives a potential edge to those vendors who see this as a good time to sell. Less property on the market means potentially a better price. This is especially true in the first time buyer and middle market, where the shortage of good quality property to buy is most acute. We really haven’t seen any change in the number of buyers registering or their keenness to find a new home.
The market is already characterised by a lack of property for sale in these key market segments and an abundance of cheap mortgage deals. House prices are showing very gentle upward growth which is supported by the lack of stock.
We have always believed that the two key market drivers are job security and availability of mortgage credit. Neither of these are going to be impacted by an election campaign that seems set to change very little if the pollsters are to be believed. First time buyer activity is at it’s best level for some years but there is not a huge choice of property around for them to buy. The market for these first time buyers is driven by the house builders with new housing estates and developments, aided by the Government’s Help-to-Buy schemes. That gives vendors wishing to trade up a great market to aim at.
What about the ‘Top-End’? The so called ‘top end’ has been somewhat slower for the last year or two, driven in part by the Government stamp duty changes which have certainly hit anyone trying to sell at £1m+ and also by the slowdown in London which has been much more severe. For vendors with more expensive homes to sell the key is realistic pricing as buyers are increasingly price (and tax) conscious.
The Council of Mortgage Lenders (CML) has weighed into the debate recently, saying that the Bank of England is to be blamed for the drastic slowing down of the property market, characterised by sellers’ reluctance. The CML says that home owners would prefer to stay put and do up their current homes.
CML economist Bob Pannell was quoted as saying that it is nearly three years since the Bank’s Financial Policy Committee intervened “to slow the future projector of the UK housing market”.
Pannell said: “Arguably it has been more successful than it was originally hoped.
“Whereas its consultation paper in June 2014 referred to a central scenario in which house purchase approvals would now be averaging 270,000 each quarter, the latest three-month total is only 205,000.”
Pannell went on to say: “We do not share the Bank’s assessment that its policies have had little adverse impact on the housing market to date.
Meanwhile the latest figures from HMRC showed that the number of UK residential property transactions dropped by 40% annually in March 2017.
HMRC’s UK property transaction statistics for March this year showed 102,740 sales during the month, compared with 173,860 for the same month last year. Remember though, that in March last year parts of the market were skewed by a stampede by investors and 2nd home buyers to complete purchases before Stamp Duty on the purchase of second or more properties was hiked by 3%.
Rightmove published it’s latest House Price Index this week and here were the headlines, which support our own view of the market:
* Price of property coming to market hits record high, up 1.1% (+£3,547) to £313,655 this month, though lower than the average increase of 1.6% at this time of year over the past seven years
* Overall annual pace of increase continues to slow, now at 2.2%, the lowest for four years:
* First-time buyer sector is driving growth, up 6.5% annually to new record of £194,881
* Strong buyer activity with the number of sales agreed the highest at this time of year since 2007, before the credit crunch
So, in summary, it is clear that there is a shortage of property for sale. It remains a great time to get your house on the market – election or no election!
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