After the traditional December lull, activity in the property market has been brisk during the early weeks of 2016, as people return from the festive holidays to action their New Year property purchasing plans. Over the Christmas period Rightmove experienced record traffic on its portal, which was up by 22% compared to the same period last year.
This apparent renewed vigor amongst buyers is also reflected by the further price growth reported in December in the major UK house price indices. Nationwide recorded prices rising by 0.8% in the month, whilst Halifax recorded a noteworthy jump of 1.7% in monthly prices. All price indices finished the year by recording annual gains, ranging from 4.5% to 9.5%; the difference in results being due to how data is recorded and different reporting periods.
The only way is up – or is it?
By this time of year most forecasters have now stated their price predictions for the year ahead, and whilst this has caused the usual divided opinions between bullish and bearish forecasters, virtually all are predicting further price rises in 2016. Accompanying these predictions many have highlighted the broad mix of issues that individually and collectively have the potential to influence consumer confidence, prices and the ongoing vitality of the market this year. Such issues include a rise in interest rates, stamp duty reforms, affordability issues, an EU referendum and weakening sentiment, principally driven by global economic volatility – an issue that Chancellor George Osborne highlighted recently when he said that the UK economy faced a “dangerous cocktail of new threats”.
Garrington believes that, whilst price movements are likely to remain positive this year, making ‘average price’ predictions has limited value due to the complexity and polarisation of the property market. Individual micro-markets (defined by price and location) are now heavily influenced by local factors.
The great divide
Despite year on year sales volumes remaining relatively unchanged in the prime market the number of homes worth over £1 million in Britain increased by 75,796, or 14% last year according to latest research. Of these million pound plus homes, 82% are situated in London and the South East. Outside of these areas the East of England and Yorkshire saw the highest spike in prime home prices, rising by 28% and 24% respectively.
This data follows trends Garrington has seen across its UK offices, with the Cambridge and Harrogate local markets being particularly competitive last year, together with Oxford and Bristol. Within these areas, it is the prime urban postcodes that have experienced the strongest price growth, and noticeably ahead of equivalent nearby rural locations.
In search of value
Despite rising house prices, an unfaltering desire to purchase a property means that homeowners and investors alike are increasingly likely to be seeking value for money in 2016, whether this is driven by affordability or by yield.
Within regional markets Garrington is increasingly being called upon for consultative advice on location options prior to commencing a property search for clients. Last year the number of people selling up and moving out of London rose by two-thirds as homeowners traded their equity gains for more affordable locations, but on most occasions remained within striking distance of London for work purposes. Research from the University of Sheffield published last month also predicts that a greater ripple effect may be seen in 2016 due to improved transport and communications, which may see cities such as Manchester, Leeds, Cardiff and Edinburgh experiencing increased demand.
Within the Capital the affordability requirement is becoming more profound amongst local purchasers, who are increasingly exploring different boroughs offering more property for their budget.
The shape of things to come
The year ahead looks to be one which is finely balanced between ‘opportunities’ and ‘threats’ in the property market. Garrington has already seen a surge of property investors active in the market, keen to conclude a purchase before the looming April 1st introduction of a Stamp Duty levy for second home purchases. After this date any void left by would-be investors is likely to start to be filled by institutional investors entering the market and high net worth sophisticated investors, acquiring more stock as result of less competition in the market from highly leveraged amateur landlords.
Whilst there may be some headwinds ahead for the property market this year, looking further ahead, both the Royal Institute of Chartered Surveyors and National Federation of Property Professionals have stated that they expect to see property values steadily climb by an average over 4% a year during the next five years.
In such market conditions the right advice, information and timing looks set to become prerequisite for success in 2016 and beyond.