Market conditions over the last month have been surprisingly brisk given the uncertainty surrounding the possible results of the general election and the consequent nervousness of both buyers and sellers.
Despite this, house price indices recorded positive gains last month and more property is now entering the market and buyer activity is increasing. Garrington has experienced this trend first hand, with an all-time monthly record number of new clients retaining us for assistance with their property searches in April.
Both of the main national House Price Indices announced surprise price gains in April. Nationwide recorded a 1% growth rate in average sale values, whilst Halifax recorded a significant 1.6% monthly jump in sale values.
Given the more sedate market conditions that had prevailed during the first quarter of 2015, these results came as a surprise to many market commentators. Whilst these figures look strong at a first glance, in reality they mask the fact that according to HMRC the market contracted in size, with recorded transactions falling by 6% during Q1; a trend further underlined by the Bank of England who report that the volume of secured lending for house purchases also fell sharply during the same period. The supply of property in the market has been severely restricted over recent months, whilst the number of buyers looking for property has remained constant, which in turn has contributed to driving up prices.
Sellers are taking advantage of competition in a market which is short of stock, with asking prices of new stock being listed increasing by 1.6% last month and the average time taken to agree a sale falling by 17% to 72 days – the same amount of time experienced a year ago when arguably the market was considered to be more buoyant.
General election result
Last week’s surprise general election result of a majority Conservative victory has been well received by those within the property market. The election pledges made by other political parties including the introduction of a Mansion Tax, aggressive tax reforms for higher earners and Resident Non-Domiciled individuals, and a range of measures affecting the Private Rental Sector combined to create significant uncertainty in the market over recent months, given the wide range of individuals who could have been affected by such policies.
The swift and decisive election result has instantly brought a much-needed level of clarity and confidence back into the market.
The London market looks set to be one of the main beneficiaries of the election result, and predictions are now being made of double-digit price gains this year as a direct result of renewed interest from prime buyers and international investors, who had previously been adopting a ‘wait and see’ approach to their property plans.
As early as Friday morning last week, Garrington had already been contacted by several clients who now want to proceed with a search for prime property due to the election outcome, sensing that delaying their plans any longer could cost them financially if prices are likely to see significant gains over the coming months.
Although market conditions are typically stronger at this time of year, given the positive economic landscape and latent demand for property, it is entirely feasible that the summer may be one of the busiest the property market has seen in recent years.
In its recent Credit Conditions Survey, the Bank of England cited that prime lending has been one area that had fallen the most over the last quarter. Given the election result and early signs of a revived prime market, we expect a reversal in this trend over the coming months.
The immediate future will be an important time for the new Government, as they will not want to see house prices spiralling out of control now the spectre of uncertainty has been lifted. The market needs a period of normality, which hopefully a healthy level of new buyers and sellers will bring.