Despite uncertainty being created by the US election result, further compounded by speculation surrounding the Autumn Statement, the property market has remained surprisingly robust over the last month.
Whilst market conditions remain subdued compared to last year, there has been encouraging data released in recent weeks. The volume of house hunters registering with estate agents rose by 32% during the Autumn market according to the NAEA, whilst the stock of new property being listed for sale also rose by 7.5% amongst its members. Further news of consumer confidence returning was reported by the Council of Mortgage Lenders, whose latest data shows that home buyers in London took out 12% more loans in Q3 than in the previous three months. This increased volume equates to 19,200 loans worth £6.2 billion, although compared with the same period last year remains 16% lower.
Expect the unexpected
2016 may well be remembered as the year of ‘expect the unexpected’, and whilst there is no denying that the political and economic climate remains unpredictable, latent demand is showing tentative signs of creeping back into the market. Such revived levels of activity are once again helping to support average house prices at a time when seasonal price falls usually occur. Nationwide reported a modest gain last month of 0.1% and Halifax recorded a similar monthly rise of 0.2%, whilst also reporting that house prices in the three months to November were 0.8% higher than in the previous quarter.
Traditionally during the Autumn period, asking prices of homes that remain unsold for several months are reduced, also creating a seasonal blip in recorded asking prices. Whilst this trend remains true to form this year, of note is that Rightmove state that the fall of 1.1% in asking prices is the lowest rate of decline seen since 2011. This further underlines the apparent resilience in the market.
Autumn Statement – of intent
Over the course of former Chancellor George Osborne’s reign, the Autumn Statement has in recent times became synonymous with key tax policy changes which directly affect the vibrancy of the market. Despite speculation as to whether the new Chancellor, Philip Hammond, would announce policies creating threats to the market, or fresh opportunities – in reality, there were no significant announcements.
Calls for a reversal of the punitive tax charges for anyone buying an additional and/or high value home were totally ignored. Instead full focus was placed on the Government’s intention to build new homes with funding announcements of £1.4 billion to construct around 40,000 additional homes by 2020/21, with London being allocated a further £3 billion for the construction of 90,000 homes. Whilst these announcements were welcome news for the construction industry and affordable home buyers alike, critics cite that these measures fail to address the real issues the housing market is facing today, which could be solved through the relaxation of certain taxation policies. However, conversely the absence of any shock announcements should help calm the nerves and give extra confidence for those wishing to move home in 2017.
A ‘just about managing’ market?
If Garrington was to make a prediction on a key theme for the 2017 property market it would be ‘affordability’ in all of its various forms. This theme is likely to be one of the key issues that will combat significant house price rises next year. The Bank of England revised its inflation forecast for 2017 last month and now predicts it will rise from the current rate of 1% to 2.7%. At the same time the Bank confirmed that a further interest rate cut this year was ‘no longer an option’. This inflationary pressure on net earnings will further impact on already historically high house price to earnings ratios, which Hometrack revealed last month now stand at 14x in London, after values have surged 86% since 2009. Nationally, the UK average ratio stands at 6.5x, but in hotspots such as Oxford and Cambridge ratios now stand at a 12 year high. Across its operating areas, Garrington has seen evidence over recent months of a switch in buyer behaviour, reflecting a growing awareness of just how far and fast house prices have risen, with affordability further affected by increased spread-costs for moving, due to higher stamp duty rates.
New Year outlook
As traditionally is the case at this point of the year, economists and market analysts have already started to make predictions on the direction of house prices for the year ahead. Ironically, all that has been made clear so far is that current predictions vary considerably, ranging from zero to 3% price growth.
However, of note is that none of the currently published forecasts are suggesting significant price falls; instead they suggest more subdued market conditions. This is logical based on the unsustainable rates of price growth seen in recent years and previously mentioned price earnings ratios. With the absence of any elections or referendums next year, it is likely that market conditions will normalise and look more positive, yet in uncertain times, buyers will remain value sensitive and cautious.
Finally, we would like to take this opportunity to sincerely thank all our clients and corporate partners for their ongoing custom and support this year. From all of the team at Garrington, we wish you a Merry Christmas and a prosperous New Year.