Monthly Market Review – February 2014

The housing market momentum seen in January has continued to gather pace in February, despite the wettest winter since records began. An ongoing stock shortage is due to the lack of new building, and vendors who are deferring sales, confident that prices will continue to rise.

Market momentum continues to build

Rightmove reported during February a 3.3% monthly price increase and an 18% increase in new sellers. Their index is based on asking prices, so is therefore a good forward indicator of market trends. Nationwide’s monthly house price data (based on mortgage approvals) recorded a monthly increase of 0.6% and the fastest annual growth for 4 years of 9.4%. Land Registry use actual sale prices for the previous month and recorded a 1% increase in January and 4.2% annual rise. Interestingly, these included a monthly rise of 2.6% for the North East versus 2.1% for London, underlining that the recovery is also taking hold outside of the Capital within some regional markets.

No need to apply the brakes yet

Benign economic and monetary conditions are underpinning the market and seem likely to continue to do so for much of this year. However, Land Registry figures for January show that sale values were still falling in some parts of the country. The Bank of England does not currently see a need to start applying the brakes on lending – in its recent Quarterly Inflation Report it notes that continuing low inflation, slack in the economy and “significant headwinds – both at home and from abroad – mean that the Base Rate may need to remain at low levels for some time to come”. It also points out that the ratio of house prices to earnings and income gearing remained well below levels reached in 2007.

Regional picture

Through its national coverage, Garrington is well placed to assess regional market trends. Across the country we are seeing evidence that sellers have been holding off marketing their homes until the spring. Selling agents in Surrey and Sussex are reporting a 70% increase in market appraisals in January, but vendors are delaying sales because of the weather and a late Easter. In prime central London postcodes, buyers are reluctant to pay for over-priced properties, but in the fringe areas sealed bids have become the norm. Our Home Counties search teams are also seeing a resurgence of buyers moving from London and trading on the disproportionate equity gains they have made. The trends seen in London and the Home counties also extend to other areas, including the North of England, where the market is short of stock, and good houses new on to the market and correctly priced, are selling very quickly.

Opportunities for investors

The recent English Housing Survey (1980/2013) shows that home owning is now at a 27 year low, having declined each year since the peak in 2003. For the first time since 1980 those renting privately exceed the number of social renters. Recent industry research reveals that nearly £1 trillion or 19% of the housing stock value is let on the open market by private landlords.

So it is not surprising that the Government is keen to encourage more housebuilding and greater home ownership through schemes such as Help to Buy. However, projected housebuilding of 167,000 new homes per annum by 2018 is still well short of the projected 240,000 needed. Landlords are taking advantage of this situation, and a new low in commercial borrowing rates, to increase their portfolios in competition with first-time buyers. LSL recently forecast a 6.6% annual return for the remainder of this year, if prices continue to rise at the same rate as Q4 2013, which compares favourably with other asset classes, especially when gearing is used.

Spring outlook

We fully expect more property to continue to come to the market in the spring, but in some areas this is unlikely to correct the current imbalance between supply and demand in the short term. In the meantime Garrington is able to add value to clients through its long–standing relationships with sales agents, extensive knowledge, credibility and access to interesting buying opportunities – ensuring any purchasing decision is a well-informed one.

Ph: +44 (0)20 7099 2773 Fax: +44 (0)20 7099 2779.

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