A very uncertain time for the housing market approaches

A very uncertain time for the housing market approaches

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John Phillips | Agency Convey

Looking at the fall-out – still ongoing I might add – from last week’s Budget, you perhaps wouldn’t be surprised if George Osborne shelved the Autumn Statement altogether and opted to give himself the rest of the year off.

Not since the 2012 Budget of the so-called ‘pasty tax’ and numerous other u-turns forced upon him, has Osborne looked so weak. Quite ironic really, given that pre-Budget he looked the most likely candidate to take over from David Cameron when he gives up Number 10 in four years time.

The political bun fight will continue for some time to come, no doubt all the way up until the next major country-defining moment – June’s EU referendum – but from a housing market perspective, what has the Budget left us with and are we likely to see a fundamental shift in the meantime?

The answer is, as often, yes and no. Firstly, take for instance the biggest issue facing our market at the moment - the lack of housing supply. Did this budget present a further boost to this country’s attempts to hit the required 250,000 new units needed each year? Undoubtedly not. There was some talk about planning changes and a slight focus on helping develop brown field sites, but I can’t help thinking that we’ve heard it all before. Yes, the Government wants to build 275,000 affordable new homes by 2020 but even if it does achieve this figure, then the overall shortfall will still remain.

To put it into context, figures from the DCLG recently revealed that during 2015, there were 143,650 new housing starts. Now admittedly this was up 6% on the previous year, and in fact were the best figures since 2008, however think about that for a second. What must the shortfall be over that eight-year period? We’re probably looking at the best part of a one million home gap between what is required and what has recently been delivered. In this situation, is it any wonder that demand continues to far exceed supply, and that this means house prices are likely to continue rising for the foreseeable future.


Now, some might see this as good news for agents, after all, would you want to be working within a rising or falling house price environment? But there comes a point where the price of houses puts too many properties out of the reach of too many potential purchasers. This is not a new phenomenon, indeed it’s been the norm for many a year, however agents (I suspect) have not been too concerned by this because there has been a strong investment demand taking up the slack and it has been investors/landlords who have been able to take advantage of the situation and buy up the stock.

But, what happens next? The last few months have seen a significant number of landlords purchasing before the stamp duty increase kicks in. Next year, the first cuts to tax relief on mortgage interest payments kick in, and it is within this new environment for landlords that we are likely to see a dialling down of demand for buy-to-let properties. Now it may not be as significant as some are suggesting – the National Landlord’s Association said 500,000 properties were likely to be put on the market by landlords selling up – however it seems likely that market activity will fall back. Indeed it may not hit similar heights for many years to come as existing landlords may feel they should stick with what they have, and potential new landlords might think the investment has become much less attractive.

I don’t believe that investing in property will drop back too much, but post-April we are likely to see a dampening in demand and this (coupled with the continuing lack of housing supply) will put agents in a less than welcome position. The Government appears to think the market will operate in a landlord-out/first-time buyer-in fashion but there are still huge obstacles for first-timers to overcome. Despite help such as the Help to Buy ISA, the Help to Buy Scheme, etc, the fact is that deposit levels are still large, mortgage lending in the high LTV market is still relatively low, and the affordability measures which need to be met to secure a mortgage are that much tighter. Not forgetting the fact that wage levels have nowhere near kept pace with house price increases.

Does this suggest to you a vibrant housing market or (perhaps at best) does it suggest a fall-back and a consolidation period as activity levels seek a new level? Agents appear therefore to have their work cut out in the months ahead, all at a time when competition is growing significantly.

Admittedly, I am in glass half empty territory here but, at this time – even before we know the result of the referendum – we could be entering a challenging period for all, and it therefore makes sense to cut your cloth accordingly and take advantage of as many current opportunities that exist, be those mortgage/protection advice, conveyancing, legal services, etc. Make the most of them now because we appear to be entering a very uncertain time for the market.

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Latest Comments

ChristinaReedUK
ChristinaReedUK 20 Jun 2016

I don't understand why it's always a war between the two sides. Either, way the landlord is probably keeping a detailed inventory and will see the changes you've made. I just don't understand why there...

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NathanGreen
NathanGreen 16 Jun 2016

Seeing that the tenants are quite satisfied with their landlords and the properties is indeed great. I wonder, though, what is the situation in London alone? The tenants face sky-high rent levels in the...

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AndiMur
AndiMur 15 Jun 2016

TheGuardian published the same forecast. But on the other hand, professional brokers express different opinions. According totranio.com, an exit from the EU would not affect the demand/supply imbalance...

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Gary Holmes
Gary Holmes 14 Jun 2016

Having a professionally completed inventory at check-in and check-out is clearly (to me at least) of minor value. Tenants make un-authorised modifications and/or walk off with items that belong to the

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Violet Gibson
Violet Gibson 14 Jun 2016

Cautious people think buying off-plan is reckless, but over the past few years investors have literally made fortunes.Pre-release prices have obvious benefits for the developer, who gets instant finance...

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Kate Windleton
Kate Windleton 14 Jun 2016

An interesting research indeed. I guess that is in complete contrast with the United States where people often move from one coast to another. It will be interesting to hear the trends for people moving...

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NathanGreen
NathanGreen 14 Jun 2016

I think it all depends on the market conditions and how well your company is doing. You will agree that you can't demand more when you're killing yourself just to hang in there. Sometimes you need all

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ChristinaReedUK
ChristinaReedUK 13 Jun 2016

What does "detecting a bad vibe" mean actually. I've had certain vibes like these and yet have always found a reason , if there's any, why I don't like a certain property. The property maintenance might...

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keybanks estates
keybanks estates 08 Jun 2016

Great News for first time buyers, about time two!

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NathanGreen
NathanGreen 07 Jun 2016

I agree with #6 - you should maintain your garden according to the target buyer. One thing is universal, though - cleanliness and order. Having the yard clutter-free and clean will help people who do enjoy...

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NathanGreen
NathanGreen 06 Jun 2016

I will always say that London is overrated. Sure it is the capital, but it's too stuffed in there. It's more of a business city to me.

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Paul
Paul 25 May 2016

Estate agents are pathetic when it comes to fees. They have this 'I had to do it at 1% because that's what the others were quoting' mentality. We are the most expensive agents in our area, charging double...

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