Monthly Market Review – February 2015

Activity over the last month has been surprisingly brisk in some sectors of the property market, albeit this has brought contrasting messages at different price levels.

Property transactions below £1m have remained relatively strong through the winter months, and this picture is evident in most parts of the UK. However, in stark contrast, activity at the very top of the market has significantly slowed as more discretionary based transactions have been put on hold, as buyers and sellers alike wait for clarity as a result of the forthcoming General Election.

Market performance

National house prices have once again become the focus of front page headlines with Halifax reporting significant price gains in February and recording a monthly growth in average prices of 1.9%. Nationwide’s House Price Index recorded a modest increase of 0.3%, which took the annualised rate to 6.8% compared with 7.2% in December.

The unexpected jump in prices reported by Halifax has come under scrutiny in the days since its release, with critics citing this as a spurious figure which is not necessarily indicative of a sustainable increase in activity.

However, latest data from the Bank of England reveals that mortgage approvals picked up in December for the first time in six months, thus suggesting that the cooling off seen in the market at the end of last year may be coming to an end.

Lenders cautiously competing

The changing credit stance of lenders in 2014, adopted as a result of the Mortgage Market Review, was widely seen as one of the key factors affecting the vibrancy of the market as the availability of credit became severely restricted by a raft of affordability checks and means testing.

Whilst prudent and responsible lending has remained the order of the day, there has been a noticeable change in recent weeks in the criteria by which lenders will offer mortgages, many of whom are now also starting to compete against one another for new mortgage business.

Experts in the mortgage market are predicting that ‘the next six months may be the best time in history’ to take out a mortgage as an interest rate price war starts once again to emerge. Fixed rates are being predicted to fall below 1% soon, with five year rates being offered around 2.5% and even 10 year rates being offered below 3%

Having previously dampened the spirits of buyers last year, lenders may now become one of the notable driving forces which help to sustain momentum in the market this year.

On and off the market

Against a backdrop of PR hype, a new national property portal launched in January called OnTheMarket.com. The launch of this site is likely to become a game changer as it is jointly owned by some of the UK’s largest Estate Agency firms and any selling agent wishing to join the site is being restricted to listing their stock on only one other portal

This key point has triggered a hasty retreat from the main established property portals by hundreds of selling agents in recent weeks. It has fundamentally changed where stock is listed; in turn spreading it far and wide across multiple portals. Most of the public remain unaware that the task of finding the right property has become more complex and challenging for buyers, as they will no longer be able to safely assume that by looking on several significant websites, they have seen all purchasing options openly available.

In addition to this change, Garrington has also observed heightened levels of activity in ‘off market’ transactions taking place during the early months of the year, as the number of sellers wanting to sell, but choosing to wait until after the Election, has increased. These sellers are already in touch with selling agents and willing to transact now for the right buyer at the right price.

Outlook

In a reversal of fortunes, it seems that the mainstream market looks set to remain active as we approach spring, whilst the prime market remains more subdued compared with recent historical standards. This trend is likely to be most profound in London, given its concentration of prime property and wealthy buyers, who will be less influenced by credit markets and more concerned by disproportionate tax changes.

Of central focus moving forward will be whether buyers accept price levels being set on new stock entering the market, and whether the level of transactions increases causing momentum to pick up across the market. Equally the forthcoming General Election remains a key event that is likely to have a significant impact on the housing market for the rest of the year.