Yahoo Finance Spring selling season stalls, as the housing market starts to feel the chill
It was an announcement homebuyers and sellers barely needed to be told – Britain’s property market is going through its flattest period in the last five years. A report from the Royal Institution of Chartered Surveyors (Rics) found that demand from buyers, and new instructions from sellers, were down again, the lowest figures since 2013.
The survey paints a picture of the UK market as one affected by the poor weather earlier this year, fears over the effects of the Brexit negotiations, and even bitter infighting among estate agents to get properties on their books.
This week marks the start of what is traditionally the spring house-selling season, but that prospect appears remote this year.
So what hopes are there for buyers and sellers trying to move home, and young people attempting to get on the ladder?
A picture of the market
The Rics survey balances surveyors who have seen price rises, versus those that have seen falls.
The latest survey, released last week, found that the housing market in the south-east and London is particularly weak, while the rest of the country was somewhat better.
And there does not appear much hope of change. “Forward-looking metrics suggest little prospect of the tide turning to any meaningful extent over the near term,” it read.
A more plainly-worded assessment is provided by those surveyed by Rics.
“The shortage of instructions has resulted in an epidemic of certain agents persistently trying to poach properties already on the market with other agents. “This is further besmirching the general estate agency business,” said one surveyor in Doncaster.
Bad weather earlier this year added to the lack of activity a number of those questioned reported. “Market appraisals and levels of activity have decreased due to the recent severe weather conditions,” said one. “New instructions were slow to come forward, strongly influenced by cold, wet weather and snow,” said another.
Some also complained of the uncertainty which surrounds the Brexit negotiations.
Last month, research from estate agency chain Your Move found house prices in parts of London – once at the centre of the UK property boom – have fallen as much as 15% over the past year.
At the end of 2017, Rics predicted that there would be a drop in prices in the capital and the south-east as the cautious mood of last year continues. “Brexit is having a marked effect on sales and prices, reducing both by up to 10%,” said one surveyor.
“There seems to be an air of uncertainty which has resulted in reduced instructions and inquiries,” replied another.
What now for the market
For those who want to sell their home, there are ways to improve their position.
The first step is to ensure that estate agents are doing their jobs properly, says Paula Higgins, chief executive of the campaign group HomeOwners Alliance.
While tradition has dictated prices would rise year on year, especially in London, this is no longer necessarily the case. “Sellers have got to be careful that they choose their estate agent very carefully. Don’t go for the one that tells you what you think you want to hear. Make sure they are there to sell your property and they are not overvaluing it,” she warns.
“Some sellers have been locked into long contracts with an estate agent who is not working in their best interest. I spoke to one person who had an estate agent who had been doing nothing for them for 26 weeks. That is half a year of their life on hold. It is a bit of an unregulated area, so do your research.”
Simple moves to make the home more attractive to a buyer can make the difference, says David Blake from Which? mortgage advisers. “It makes sense to try and get your property into a condition where someone viewing it wants to buy it. That might mean investing a bit of money.”
And for the buyers?
A lack of availability of appropriate properties has stalled many buyers from investing and getting onto the ladder.
“There is a fundamental lack of affordable housing in the UK, especially if it is something that is priced properly ... if someone wants to sell, get in quickly,” urges Higgins. For those holding off, they need to consider the costs of not buying, Blake points out. “A buyer needs to take a long-term approach and think about the cost of renting over that time.”
For those committed to buying now, despite the lack of supply, Higgins says they may have to open their minds to other options. “Don’t be so prescriptive about what you want. Find a ‘doer-upper’, or something with potential, rather than a property that is ready to move in.”
She points out that a third of transactions fall through, which highlights the need for buyers to be organised and ready to go ahead with a sale. This means having funding sorted so that once an offer is accepted, you can move quickly.
First-time buyers
Changes which were brought in with the new tax year on mortgage interest relief for buy-to-let mortgages, could have a knock-on effect for first-time buyers.
At the beginning of last year, landlords could offset all mortgage interest payments against rental income but this was reduced to 75% in the 2017-18 tax year and is now down to 50%.
As many buy-to-let landlords are on interest-only mortgages, these changes have drastically affected incomes and the number of people moving into the sector.
This could free up properties for first-time buyers who have typically gone head to head with buy-to-let landlords, says Higgins.
Other first-time buyers could, themselves, apply for a buy-to-let mortgage if they are priced out of the market where they live, says Blake.
He said: “Some people have made the decision, ‘I live in London, I can’t afford to buy a property that I want to live in, in London, but I want to get on the housing ladder’.
“A deposit which is 5% in London is 25% in the country and can buy an investment property to let out.”
Mortgage rate rise could go on hold
Bank of England governor Mark Carney announced in November that interest rates would rise for the first time in a decade, from 0.25% to 0.5%. A further two rate increases of 0.25% are expected before 2020 with some economists predicting another could come as soon as May. However, the slow property market has also led to questions over whether the interest rate rise will be delayed.
Rics chief economist Simon Rubinsohn says it could prompt the Bank of England to stall the next rise. Some 9.2 million households across the UK have a mortgage, half of which are on standard or a tracker rate.
The rise in November meant that the average homeowner – with a typical mortgage of £175,000 – was hit with an increase of about £22 a month. Another two quarter point rises would add an additional £67. There are further suggestions that the Bank may “normalise” rates following a decade of low interest. This could leave rates at about 3%, which would result in a much more painful monthly repayment for many.
