The housing market - underperforming or a return to health?

"In terms of the rest of 2016 and beyond, I think unless we get such Government intervention then we are looking at a ‘same as...’ market for some time to come."

My belief about what is happening has always been predicated on our own performance, certainly in terms of instruction levels, because this gives us plenty of insight about underlying demand and activity. Our pipeline tends to show where the future course of the market might lie, and we believe the same can be said for the statistics which emanate from the estate agency sector. After all, when it comes to purchases, they are the first line in determining what consumers are feeling about the housing market and their motivation for engaging with it.

The recent statistics from the National Association of Estate Agents reveal the proverbial ‘mixed bag’ and, to my mind, this seems to chime with what we are experiencing. According to the NAEA, demand for property increased month-on-month in September, up 16%, however the supply of homes available per agency branch fell. Alongside this, sales to first-time buyers fell by 5% in September to the lowest level since November 2015. Overall however the number of sales agreed per branch rose by 12.5% to an average of nine per branch.

Looking at these statistics it’s possible to see something like a return of confidence after the EU referendum shock inflicted on the market in June/July and August. Add in the fact that September normally offers a seasonal boost and it appears we still have the remnants of an ‘average’ market at present. Demand levels, which undoubtedly have suffered because of the increase to additional property stamp duty at the start of April, appear to be making a slow recovery but supply is still a major issue (no surprises there) and looks likely to maintain a big impact on the overall market for some time to come.

For first-time buyers, the anticipated boost to their hopes of purchasing a property have simply not materialised. In that sense they have been sold something of a ‘pup’ by the Government who told them that their attacks on buy-to-let landlords would directly help them. They haven’t, and they were never going to, unless of course the Government hoped that landlords would simply give up on buy-to-let and hand any excess cash over to first-timers for them to use as their deposits. Instead, what has happened is that the Government’s measures have dampened purchase demand and the EU vote has exacerbated this. Plus, when you consider that Help to Buy 2 will finish as planned at the end of the year, potential first-time buyers are probably now wondering what all the fuss was about?

Advisers will know only too well how the purchase market has been impacted throughout the second half of the year. While cuts to rates makes remortgaging more attractive, whether this compensates for subdued purchase activity is another thing altogether. I suspect it does not, which is why we are all awaiting the Autumn Statement with a great degree of anticipation. Let’s be honest, the market needs a boost – whether Philip Hammond will provide one via a stamp duty u-turn is impossible to predict. I would think not but that still won’t stop me from crossing my fingers. I think the focus will be on building new units and supporting house builders and therefore helping landlords out may not be on his agenda. However, if he does want to boost the purchase market and get the market moving again – in a start of 2016 style – then removing the stamp duty increase would provide a considerable one.

In terms of the rest of 2016 and beyond, I think unless we get such Government intervention then we are looking at a ‘same as...’ market for some time to come. Slowly buy-to-let landlords might feel confident to add to portfolios – and I think we’re already starting to see this – but when it comes to first-time buyers, the numbers are unlikely to change too dramatically. Remortgaging may provide a business boost, but it looks likely that no further cuts to Bank Base Rate will be forthcoming, and should inflation continue in the same vein, then the next decision could be back up, perhaps during next year. Add in the Brexit negotiations, and what this might do to housing market participant confidence, and you’ll understand why I’m suggesting you make the most of every single business opportunity that crosses your path.