Monthly Market Review – March 2015

Over the last month we have seen a general softening in market conditions as a more cautious approach is being adopted by buyers and sellers, despite economic fundamentals remaining healthy.

Activity continues at its strongest in the regional and investment markets, albeit Garrington has experienced renewed purchasing interest in the London market over recent weeks as some buyers sense opportunities in a slower market.

Market performance

After making gains early in the year average house prices fell again in February according to the major national house price indices.

Having recorded an increase in prices in January of nearly 2%, Halifax reported prices fell by 0.3% during February. Nationwide’s House Price Index also recorded a decrease of 0.1%, which took the annualised rate to 5.7%, significantly lower than the annualised rate of 9.4% being reported exactly a year ago.

Whilst on the face of it the current monthly price trend appears to be a downward one, quarterly average price comparison data still records positive price movements. This is generally a more reliable indicator rather than the more volatile monthly data.

Also of note in February was that Bank of England data for recorded mortgage approvals increased for the second consecutive month to 60,786, albeit this volume of approvals is down 20% compared with this time last year, providing further evidence of the more subdued prevailing market conditions.

The changing face of housing

A significant piece of research was published in February by the Department for Communities and Local Government and highlighted a number of trends which are likely to continue to characterise the future property market. The English Housing Survey reveals that home ownership is now at a lowest level for almost thirty years standing at 63.3% – down from its all-time high in 2003 of 70.9%. Over the last decade the number of privately rented households has nearly doubled to 4.4 million, albeit 61% of those renting such properties still aspire to buy their own home.

Garrington has continued to see on the ground evidence supporting these trends, having received a noticeable increase in investment client enquiries over recent months from buyers wanting to take advantage of rising tenant demand, and also a number of high value rental assignments from prime buyers waiting for clarity on election results prior to making a purchase. Our corporate relocation division has also been busy, with no signs of sentiment weakening in the corporate market or faltering levels of inward investment.

Sentiment outweighs fundamentals

Expectations of a quieter property market at the start of 2015 appear to be accurate based on current conditions. However the underlying factors which traditionally drive the market such as the availability of credit, low interest rates, good job security and low inflation and increasing disposable income, all look favourable for would-be property purchasers.

Despite these factors a number of buyers are still stalling moving plans, and price optimism as measured by the Halifax’s Housing Market Confidence Tracker fell to its lowest level for 18 months in February. Despite this fall in confidence, 52% of respondents still believed that house prices would rise further over the next 12 months.

Affordability issues are increasingly being cited as an issue across the market, particularly in London and the South East where house prices now stand at 12 times average earnings.

Outlook

The spring market usually triggers a seasonal upturn in activity but with ongoing concerns about election outcomes and what this might mean for property buyers, it is likely that market conditions will remain relatively quiet until mid-May.

The Chancellor is due to deliver his final Budget on March 18th, and the housing market will hope for further tax incentives to encourage greater house building and home ownership.

Garrington will continue to monitor the market carefully and report its latest findings, as well as its assessment of the Budget next month.