"There is a persistent supply and demand issue in the UK’s housing market, and this is creating an increasingly competitive environmen"
Reasons mused for the downturn include a lack of choice; uncertainty due to the calling of an early election; and the ramifications of stamp duty changes as factors hampering activity.
New instructions remained negative for a fourteenth month in a row at the national level, leaving average properties on estate agents books hovering close to record lows.
15% more respondents saw new instructions drop in April, and perhaps consequently, new buyer enquiries were unchanged nationally having failed to see any meaningful growth since November 2016.
Alongside stagnant buyer demand, respondents reported agreed sales were beginning to slip slightly following a number of months of flat transactions. Overall 9% more respondents saw a drop in sales over the month (from -3%), which is the weakest reading since the aftermath of the referendum.
Looking ahead, the flat picture for sales is expected to continue over the next three months and expectations have moderated in virtually all areas of the UK when compared to the March survey. However, the twelve month outlook is more optimistic with 31% more respondents anticipating a pick-up in sales over the year ahead at the national level.
Despite the subdued backdrop, 22% more respondents saw prices rising in April, (unchanged from March) – underpinned by the lack of stock. As such, house prices continue to rise nationally, with the pace of growth steady over the last five months, although there is variation across the UK. In Central London the indicator on prices has been in negative territory for 13 months. In addition, price growth has eased noticeably in in East Anglia recently and, along with the North East was not seen to have seen any increase in April. At the other end of the scale, in the North West 67% more respondents noted higher prices in April with the reading having been above 50% in this part of the country in each of the last seven months.
Looking ahead at the national picture for near term price expectations, these have eased slightly with the net balance moderating to +4% (from +11%) suggesting that house price inflation is anticipated to slow in the three months ahead. Notwithstanding this, the twelve month expectations predict that all parts of the UK will see growth in house prices.
Paul Smee, CML director general, commented: “This positive picture of mortgage performance is good news, and reflects a continuing benign interest rate and employment environment. However, it is important that borrowers continue to think about the future, and how they would cope with less positive conditions, even if that scenario seems distant.
Lenders will always work with borrowers to try to help them through the inevitable periods of difficulty that life may throw at them, such as periods of unemployment, illness or relationship breakdown. So anyone facing difficulty should not hesitate to make contact with their lender, who will wish to help them resolve their difficulties and remain in their home wherever possible.”
Simon Rubinsohn, RICS Chief Economist, commented: “Although the picture clearly does vary across the country, the bulk of the feedback we are receiving points to a fairly flat summer for both activity and prices. Lack of stock on the market remains a key challenge for the sector with recent and forthcoming tax changes having a material impact on transaction levels, particularly at higher price points. Uncertainty relating to the forthcoming general election is also highlighted by some respondents as a reason for inertia."
Robert Grigg, Managing Director of Property Finance at Hampshire Trust Bank, had this to say: “In order to make homeownership a reality for more people, we need to boost housebuilding activity and we believe SME housebuilders are key. Smaller housebuilders not only help to increase housing stock, but as they tend to work in the regions in which they are based, they tend to have in-depth knowledge of the local area and this helps them build more attractive properties, of the right type in the right locations. With our SME Growth Watch report highlighting that economic uncertainty is the greatest barrier to growth for smaller firms in the construction industry, we urge the government to focus on creating a stable environment for SME housebuilders to grow as we head towards the General Election, Brexit and beyond.”
Stephen Wasserman, Managing Director at West One Loans, comments: “There is a persistent supply and demand issue in the UK’s housing market, and this is creating an increasingly competitive environment. Against this backdrop, investors need to have access to flexible and fast financing to enable them to capitalise on the opportunities currently out there. In order to keep up the pace, we are starting to see a rising number of investors turn to alternative finance arrangements, such as bridging loans. These will become more important as the property market picks up again, which we are confident we’ll see in the coming months.”
