Market activity in the early weeks of the New Year has been relatively sedate whilst life returns to some sense of normality after the festive break, and buyers and sellers alike pause to consider their moving options in 2015.
The start of the year has also brought about some of the widest conflicting annual forecasts seen in recent times. This is largely as a result of the numerous factors that could affect market sentiment this year; many of which will be directly influenced by the result of the forthcoming General Election.
Despite such conflicting views, the foundations laid over the last 12 months for a continued housing market recovery still look strong and average price movements have remained positive in the final quarter of 2014, albeit at a lower rate than seen earlier in the year. Both Nationwide and Halifax have reported that prices increased in December by 0.2% and 0.9% respectively and both lenders were reasonably aligned in their views that annual house price growth in 2014 stood at 7.2% and 7.8% respectively.
Wider economic data has also remained positive in recent weeks. The fall in the rate of inflation to 0.5% brings welcome news for borrowers, with the prospect of higher disposable income through falling living costs, and a suggestion by Bank of England Governor Mark Carney that any increase in Bank Base Rate might be further deferred.
Caution remains prevalent
Whilst annual house price growth figures are encouraging, they do however mask the fact that sentiment has weakened in recent months and that the volume of completed housing transactions is slowing.
Royal Institution of Chartered Surveyors data shows that the number of new buyer enquires across the whole of the UK fell for the sixth consecutive month in December. This data aligns to figures released by the Bank of England, which reports that mortgage approvals had fallen to a 17 month low towards the end of last year.
With less active buyers entering the market, sellers are once again having to adjust their sale value expectations and Rightmove has reported that asking prices fell by 3.3% in December – the largest recorded monthly fall in 2014 and the second consecutive month that asking prices have fallen.
A year of two halves
Given the above backdrop and the timing of the General Election, Garrington believes that we may see a reversal of the trend witnessed last year. This would mean that the early months of 2015 are likely to be more subdued and favour buyers, and the market will then regain momentum over the summer months, once it is clear which political party is leading the country and what policies they will be introducing.
These market dynamics are likely to affect different groups of buyers in different ways. International buyers making high value acquisitions in the super prime market are likely to adopt a ‘wait and see’ approach in the coming months, particularly given the potential threat of further tax reforms.
Domestic demand is likely to remain robust, and in recent weeks Garrington has seen heightened interest from both investment buyers and London homeowners wishing to relocate to the country, to take advantage of disproportionate London price increases.
Finding the right property
Whilst the sale price being paid by buyers is likely to be more favourable in the coming months, the task of finding the right property looks set to become more challenging in the short term.
Slower market conditions are likely to deter some discretionary sellers from entering the market. Rightmove has already confirmed that the 76,823 new properties which entered the market in December was down 4% on the same period a year ago, and was the second consecutive month of a year on year fall.
This trend is likely to give rise to more ‘off market’ activity in the first half of 2015, particularly in the prime sector of the market. Discretionary sellers will entertain viewings and a sale, but will not overtly market their homes through fear of the property becoming “stale” and leading to price reductions.
So whilst the general outlook remains positive and offering opportunity, the market is undoubtedly going to become more complex in nature. Garrington remains well placed to offer the right expert advice in London and across the UK and looks forward to assisting clients to make well informed purchasing decisions throughout 2015.