After a promising first quarter of the year, the spring property market looked on track to follow the seasonal norm; to be some of the busiest months as people agree transactions ready for a summer move. Unfortunately, however, despite the need for a strong and stable economic environment, further unforeseen political events have prevented the market gathering the expected momentum and it remains as challenging to predict as the weather.
Economic fundamentals remain positive and according to the Halifax Housing Market Confidence Tracker, confidence in the property market remains high, with nearly six in ten respondents (58%) expecting average property prices to rise in the next 12 months, compared to just one in ten who expect prices to fall. Despite this, latest house price data records that average sale values slipped compared with the brisk start of the year. Both Halifax and Nationwide recorded a monthly fall in average house prices of 0.1% and 0.4% respectively – a trend not usually seen at this time of year. By contrast, the average asking price of property coming to the market hit a record high of £313,655 in April according to Rightmove, up 1.1% compared to the month before. Underpinning these bullish sellers’ expectations is the ongoing lack of stock for sale in the market, which the NAEA state is at its lowest since records began.
On the ground, Garrington is seeing wildly contrasting market conditions across the country and at different price points. Over recent weeks we have seen double digit price reductions happening in some areas, yet gazumping occurring in other parts of the market, thus underlining how polarised the market has become.
Election curveball delays spring bounce
The decision by the Prime Minister to call for a snap General Election on 8th June could not come at a worse time so far as the property market is concerned. The problem with the current housing market is that there is a large volume of discretionary buyers and sellers whose natural reaction to this latest uncertainty will be to continue to sit on their hands.
Whilst many are predicting a Conservative landslide victory, recent political and voting events, both at home and abroad, have conditioned people not to assume anything is a foregone conclusion and to expect the unexpected.
In the absence of a political upset, history shows that in the aftermath of an election there is usually a spike in market activity and therefore a ‘summer bounce’ is entirely possible. During three of the last five election years, the spring bounce in transaction levels has been tempered. In 2015 (the most recent election year) sales in the run-up to the vote during March and April were 9.2% lower than might have been expected.
The pick-up in transactions after elections has traditionally begun almost straight away. Over the last five election years, sales in the two months after the election have increased, on average, by 18.1% compared to the previous two months. This compares to a rise of 13.4% during the same period in non-election years. The pick-up in 2015 was even more pronounced. Sales in the two months after the election rose by 21.2%.
North-South divide reversed
Annual house price growth across the UK’s top 20 cities was 6.4% in March, slightly higher than the UK average (5.7%) according to Hometrack. Growth across UK cities during Q1 2017 was 3.5%, the highest quarterly increase for 3 years with Birmingham and Manchester recording growth of over 8%. Of note is the reversal in fortunes of price growth between northern and southern cities. 70% of the top ten highest performing cities for price growth are now located in the north of the UK.
Attractive affordability levels, record low mortgage rates and an improving economic outlook are all supporting demand for housing in these locations. Garrington’s North West, East Midlands and North East teams are all reporting brisk market conditions, with correctly priced ‘best of breed’ homes selling quickly and investment opportunities sometimes selling in just a matter of days.
In contrast, house price growth in London, Oxford and Cambridge has slowed to less than 5% for the first time in five years as affordability pressures and tax changes for investors constrain demand. In these areas, Garrington is still seeing healthy activity, but buyers have become far more value sensitive than seen in recent years, as market dynamics change in these locations.
Over the coming weeks we will learn more about the housing, tax and economic policies that each political party would adopt if elected and how these might affect some of the regional markets mentioned above. Within four weeks we will know the outcome of the General Election and without doubt, this will have a profound effect on the market outlook for the rest of 2017, which many are hoping will bring a much-needed period of calm and clarity.