The latest data and analysis from Nationwide has revealed that the UK housing market remained largely subdued during July.
The figures showed a slight slowing in the rate of annual house price growth to 0.3% and a modest 0.3% month-on-month rise, after taking account of seasonal factors
Robert Gardner, Nationwide’s Chief Economist said, “Annual house price growth remained below 1% for the eighth month in a row in July, at 0.3%. While house price growth has remained fairly stable, there have been mixed signals from the property market in recent months.
“Surveyors report that new buyer enquiries have increased a little, though key consumer confidence indicators remain subdued. Data on the number of property transactions points to a slowdown in activity, though the number of mortgages approved for house purchase has remained broadly stable. Housing market trends will remain heavily dependent on developments in the broader economy. In the near term, healthy labour market conditions and low borrowing costs will provide underlying support, though uncertainty is likely to continue to exert a drag on sentiment and activity.”
Low turnover, why aren’t people moving?
Taking a longer-term view, housing market activity has been broadly stable in recent years, with the number of properties changing hands equal to around 5% of the total number of homes in the UK.
This turnover rate (of around 5%) is significantly higher than the lows seen in 2009, but is still well below the rates of 8% seen pre-crisis.
By contrast, first time buyer transaction numbers have now almost recovered to pre-crisis norms. This reflects the steady improvement in labour market conditions in recent years, together with historically low mortgage interest rates, and an improvement in credit availability (including the introduction of schemes such as Help to Buy).
It is less clear why home mover activity has remained so subdued. However, the lack of properties on the market (see the chart at the top of the next page) is likely to be a factor. This has led to a less liquid market, which may be deterring some potential home movers from trying to sell their own properties – a trend which becomes self-reinforcing.
There is a demographic aspect to this. Alongside the rise in under occupation, there has been a marked decline in home ownership amongst younger age groups (in particular, those aged 25-34 and 35-44). Under occupation tends to be less prevalent amongst younger households, whereas around two thirds of properties owned by those aged 65 or over have two or more spare bedrooms.
The declining proportion of younger owner occupiers may also be impacting home mover activity, as younger households tend to move more frequently. For example, for those aged 35-44 owning with a mortgage, the average length of time in their current property is 6.8 years, while for those aged 55-64 it is 17.2 years.”
As ever, the property industry was quick to react. Here’s what they’re saying:
Tomer Aboody, director of property lender MT Finance said, “It is welcome news that first-time buyer numbers are hitting levels close to pre-crisis norms, helped by low mortgage rates and a combination of shared ownership, help to buy incentives and high employment. Lower stamp duty on the cheapest homes has also played a part in boosting numbers.
However, it is no surprise that overall sales volumes are down and they will stay down until stamp duty is reviewed and either lowered or overhauled. Once this is done, the market will be re-energised, which will help increase overall sales figures and lead to the holy grail of more transactions.”
Mark Harris, chief executive of mortgage broker SPF Private Clients said, “First-time buyer numbers have recovered to pre-crisis norms but there is still a lack of people willing to move home. Lack of properties on the market is undoubtedly playing a part as sellers wait and see what happens with Brexit before making a decision. The cost of moving is also having an impact, with homeowners remortgaging and releasing cash to improve their homes, rather than shelling out tens of thousands of pounds on stamp duty.
The number of mortgages approved for house purchase remains broadly stable with lenders keen to lend. Several lenders, including NatWest, have been reducing pricing across their product ranges, while others compete for business by tweaking criteria to make it more favourable, such as lengthening maximum mortgage terms and loan sizes.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman said, “The Nationwide figures are always a good indicator of market strength, not least because of their longevity and accuracy.
“These confirm what we are finding on the ground that the market is very much in limbo on the one hand underpinned by near record low mortgage rates and improving affordability but on the other, not moving ahead as we might have expected. One of the reasons for the lack of activity is clearly political uncertainty but there is no doubt that talk of changes to stamp duty is also weighing on perspective sellers’ minds.
“Fortunately, first-time buyers are slowly returning, taking advantage of buy-to-let landlord caution following various tax and regulation changes. Looking forward, we don’t expect the situation to change too radically until there is more clarity on the political front, although there is no doubt some buyers are looking beyond Brexit and making the most of more realistic pricing.”
Sam Mitchell, CEO of online estate agent, Housesimple said, “We shouldn’t be disheartened by the ‘subdued growth’ seen in these latest house price figures. Quite the opposite. Seeing growth at all demonstrates the strength and stability of the property market against a backdrop of political and macro uncertainty seen in recent months.
“Plus, very encouraging pockets of positivity are emerging for the first time buyer market too, where thanks to cheap borrowing and a strong jobs market, we’re seeing the figures finally return almost to pre-crisis level.
“And let’s not forget, recent statistics revealed significant variations in regional house price growth, with the North West and West Midlands showing sturdier than expected signs of resilience.
“With a new occupier in at Number 10 it will be interesting to see what changes lie ahead to support buyers and sellers. There have been a number of ideas thrown about, with one suggestion being to move the burden of stamp duty from buyers to sellers.
“Whatever changes are made, the new PM needs to act quickly to avoid uncertainty, which could leave buyers and sellers alike sitting on their hands anticipating a change.”