Blog
Business as usual?
Tuesday, September 20, 2016
In many ways the housing market is sending out signals that it is business as usual. A recent Acadata survey said that while annual house price growth slowed to 5.5% in July, transaction levels had edged up. The number of properties on the market in the UK has risen 3.6% since the referendum; the Building Societies Association’s chief economist Andrew Gall said “It remains too early to tell how confidence in the housing market will be affected by the decision to leave the EU, but it remains business as usual for building societies,” as building society approvals rose by 20% in the second quarter.
The Brexit vote does not seemed to have exacerbated the usual summer listings lull, according to Rightmove. Figures from the property portal’s latest house price index show that new listing prices fell 1.2% on average to £304,222 during August, exactly in line with the normal seasonal drop over the past six years. Annually, the figures show growth has slowed from 4.5% to 4.1%. In terms of how long properties are taking to sell, homes with 4+ bedrooms take longest (on average 74 days to sell) but overall, compared with August 2015, on a year-on-year basis, homes are actually selling faster.
Miles Shipside, Rightmove director and housing market analyst, said: “Many prospective buyers take a summer break from home-hunting, and those who come to market at this quieter time of year tend to price more aggressively. This summer is also affected by both Brexit uncertainty and the aftermath of the buy-to-let rush in March to beat the Stamp Duty deadline. Most sellers seem to recognise that buyers may want some extra encouragement. The average fall in new seller asking prices at this time of year has been 1.2% over the last six years, so this month’s fall is exactly in line with the long-term average.”
The Bank of England cut interest rates on August 4th, taking the base rate to a new low of 0.25%. This is the first cut since March 2009 – so what does it mean for mortgages? If you have a fixed-rate mortgage, it does not mean anything. But if any of your borrowing is on a variable rate then it should be good news. Approximately 1.5m UK borrowers have mortgages that track the base rate and they will see their monthly repayments fall from the start of September. For a homeowner on the average variable mortgage rate of 2.86% and a mortgage of £150,000, the reduction could mean monthly repayments falling by £19.68 to £687. Most lenders can choose what to do with their standard variable rates although the governor of the Bank of England has made it clear that they are expected to pass on the cut to borrowers. The rate cut is likely to encourage more people to take out mortgages although borrowers still have to pass the stress tests to check that they can still afford mortgage repayments in the event of a rate rise.
Shipside says: “While the summer sales slowdown has come early in some locations with the run-up to the referendum subduing activity in May and June, there are still hundreds of thousands of buyer enquiries every week. Buyers can often get a better deal at this time of year if estate agents match them up with motivated sellers. By autumn we should get a clearer view of the strength of any post-referendum hangover, though that also depends on buyers’ confidence to turn this interest into action. The latest interest rate cut making already cheap-to-borrow money even cheaper should act as an added boost to confidence.”
The rush from investors to buy property before the April stamp duty changes led to a boost of rental properties with 8% more newly-marketed rental properties in Q2 compared to the same period in 2015 giving tenants greater choice in some areas including the South East. The increased supply did not stop rents rising this quarter though - the South East saw rents increase by 5.1% over Q2. Demand shown by email and phone enquiries for rental properties from prospective tenants via Rightmove was up 2% this quarter compared to 2015 figures, and up 1% year-on-year in the two weeks immediately following the referendum result.
It may be too early to predict any long term impact of Brexit for the rental market, but latest figures show that it’s business as usual for tenants looking for a rental property. The dip in demand seen in the three days immediately after the referendum result has returned to usual levels of searching. Many investors are still actively looking to purchase buy-to-let properties and with the interest rate cut the long-term rewards of a buy-to-let are still rewarding compared to other investment options. Looking towards the autumn property market, the underlying fundamentals are positive. Demand is strong across both residential sales and lettings with buyers motivated by low lending rates. As stock levels increase, sensible pricing and skilled negotiation will be required to keep sales and lets on track from offer to completion. If you’re looking to sell or let your property this autumn, call your local property expert at The Frost Partnership or see our range of available property across Buckinghamshire, Berkshire and Middlesex here.
