Whilst London, the South East and latterly East Anglia have seen prices and activity levels slump of late, the ongoing ‘Northern Powerhouse’ effect on areas such as the Midlands, Yorkshire and Humberside, Scotland and Northern Ireland has seen both buyer numbers and house prices increased in August, with ongoing ‘positive momentum’ suggested for these regions for the rest of this year.
However, the latest survey of RICS members also revealed that there are renewed concerns about the lack of homes available to buy in the UK overall, as the number of new property listings dropped in August with stock levels still close to historic lows.
A lack of new properties to buy is one of the main causes of a stagnating market, as if would-be buyers who are considering moving are unable to find properties of interest, it’s unlikely that they will list their own home for sale.
Of course, buyer affordability is another key factor. With prices in many areas outside of London now approaching – and in some cases now higher than – their previous pre-crash peaks, although the cost of mortgage borrowing remains competitive the lack of homes for sale is creating upwards pressure on values meaning that buyer affordability is stretched, particularly in the first time buyer and second stepper sectors.
The story in London and the South East is, as has been widely recognised, rather more challenging but it is important that this is not seen as being indicative of the wider market
This is highlighted in a separate report released by trade body UK Finance yesterday, which suggests the average home mover is now borrowing £185,999 to fund their next purchase, meaning 17.7 per cent of their gross household income is used to service the monthly mortgage payment.
The latest UK Finance data also points to the average loan to value (the mortgage amount borrowed versus the purchase value of the property) being at 72.5 per cent, suggesting many current movers are potentially benefitting from an uplift in value of the property they are selling, which is providing them with a significant amount of capital to help fund the purchase of their onward move.
Speaking of the report released today, Simon Rubinsohn, RICS Chief Economist, commented: “It is clearly very difficult to talk about the housing market at the moment without being acutely aware of the marked differences in trends across the UK.
“As the latest RICS results highlights, in many parts of the country the housing market actually remains quite firm.”
Simon continued: “While a combination of a lack of stock and some level of uncertainty, both relating to the interest rate outlook and Brexit, has had an impact on activity, the overall picture in these areas is still encouraging.
House prices between regions show a disparity (Image: GETTY)
The average home mover is now borrowing £185,999 to fund their next purchase (Image: GETTY)
“The story in London and the South East is, as has been widely recognised, rather more challenging but it is important that this is not seen as being indicative of the wider market.”
Over in the residential lettings sector, the findings in today’s RICS survey also point to a continued fall in the number of landlords advertising new properties in August, which has led to an increase in rents in many areas, potentially even in some boroughs of London.
This is most likely due to the ongoing impact of the changes in taxation on landlords, which has meant many investors are now offloading rental properties, leading to an overall shortfall in the number of homes to rent.
As Brian Murphy, Head of Lending for Mortgage Advice Bureau observed: “The lack of new landlord instructions as reported by RICS this morning is, one might suggest, a double-edged sword; good news for those investors who still have ‘skin in the game’, however potentially not so positive for tenants given the increasing lack of choice and upwards pressure on rents.
“Whether or not this signals the start of the private rental sector beginning to settle now that those in the buy to let space have had time to assess the impact of Section 24 and plan their finances accordingly, however, remains to be seen.”
So, what does all this mean for the UK property market for the rest of 2018? Surveyors point to buyer demand remaining broadly flat for the rest of this year, suggesting a more cautious approach from many due to the ongoing Brexit saga and prevailing political headwinds.
That said, in some pockets around the country, in particular the Northern regions, consumer confidence seems stronger which has clearly had a positive impact on values, and may remain the case over the next few months.
Founder and CEO of Emoov Russell Quirk, suggested: “The sluggish market performance in London and the South East will continue to dampen the national picture as a whole.
“In the meantime, both sales and price growth remain very strong in other regions and these areas will continue to carry their weaker counterparts as we approach the finish line for 2018.”
Surveyors point to buyer demand remaining broadly flat for the rest of this year (Image: GETTY)
For those in the market to purchase, depending on where you want to buy, it may be harder to negotiate on the asking price if there are fewer properties available. However, those who are able to move quickly, for example who either have nothing to sell or are in advanced stages with their own sale, are more likely to be able to make a successful bid against competitive buyers.
However, in areas around London and the South East, where activity levels are flat – or worse – and house price growth is still in negative territory, negotiating a significant reduction in asking price is still possible, but again it all depends on the circumstances of both the buyer and seller in terms of just how much can be lopped off the asking price. In these situations, it’s sometimes helpful to remember that you make money when you buy – not when you sell.
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