Brexit Election Special

18/12/2019
65
9 min read
Our latest housing market update, released on the day of what many have termed the Brexit Election, only examines the various parties' housing policies and swerves centring otherwise on Brexit. Hopefully our readership will find this a blessed release.

Manifesto Housing Policies – fresh from the parties' presses


Conservatives

A party in government has the distinction of being able to trade on its record, and the Conservative party has done this, with the exception of one new initiative:
The new initiative might fall down at the first hurdle simply because of the high fixed costs of staircasing each time you do it. Shared ownership is the most expensive form of home ownership to maintain with its rents, other leasehold costs and staircasing charges.

A government spokesman told us that there were plans to square the circle of somehow reducing the fixed staircasing charges to the consumer, but, in the absence of a reply to our questions about this from Robert Jenrick, the present housing secretary, despite a month elapsing, we're less than convinced.

Whatever the merits or demerits of Help to Buy – it has created hundreds of thousands of new home owners but with some detractors arguing that among other faults it has artificially pushed house prices up further – the first time buyer stamp duty waiver has been very popular. The Help to Buy ISA, however, has now closed (see below) and was fundamentally faulty.

Labour

  • 1 million 'genuinely affordable homes' over 10 years
  • Suspension of Right to Buy
  • More money for councils and housing associations to 'build at full scale'
The Conservatives might therefore claim to have stolen a march on Labour already in terms of house building activities (1.3 million); Labour has defined 'genuinely affordable' as 'linked to local income', which has the potential to level things somewhat, however the devil, as usual, would remain in the detail.

Suspending Right to Buy essentially has merit because successive governments – of both main colours – have signally failed to replace stock sold. And Right to Buy has simply become a lottery-like chance of obtaining a capital gift for the lucky few to be allocated a municipal home.

Labour is always vulnerable to criticism of overspending and the pledge of an unspecified increase in council and housing association funding for building has already attracted criticism.

Liberal Democrats

  • 300,000 new homes to be built every year and 100,000 social homes for rent
  • Halt the loss of 10% of the housing construction workforce
  • Increase council tax by up to 500% where homes are left empty for more than six months.
The first promise is in line with what experts say is required just to keep pace with housing need. The second is simply trading on the party's stated – and polar – remain position: the projected 10% workforce loss concerns EU workers who will leave the country post-Brexit. The last promise is the most radical; however cynics have reasonably claimed that it's easy to be radical when your chances of forming a government are negligible.

Greens

  • Scrap Right to Buy
  • 100,000 social homes for rent
  • Action on empty homes
  • Axing buy-to-let tax breaks
If anything, the greens have a similar housing manifesto to the Lib Dems, but with much less detail. Axing buy-to-let tax breaks, given the increasing tax incursions buy-to-let landlords have already suffered, will have no appeal to the landlord class.


November – Cash Buyers were the winners

In other – more regular - news, cash buyers have been the winners is the overriding narrative arising from our analysis of the latest monthly housing market figures, with a footnote that first time buyers have once again dipped, hopefully temporarily.
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Overall, England and Wales' housing market news for the November month continued to be unprecedented in a febrile mid-Brexit market.

All stakeholders will welcome the higher sales volume levels registered in both England & Wales and London: these should be reasonably proportionate to price rises. But this hasn't happened as we'll analyse below.

[All statistics which follow are the most recently available figures from the Land Registry and the Bank of England unless otherwise stated.]

England & Wales: average sales prices and volumes

From last month's record average price level, £246,317 there's been a drop of 0.2% month-on-month to £245,724. However volumes rose 5.1% month-on-month, from 66,292 to 69,841. Ceteris paribus, once again this isn't a sign of a normally-functioning market with prices not rising similarly alongside the volumes.

An examination of cash purchases for the most recently-available month's figures reveals that for this grouping, prices rose 1% (index from 120.77 to 122.01) although volumes rose by 13% (17,196 to 19,445). You might expect in orthodoxy that price rises would have risen considerably more therefore – cash buyers, who might well be making their purchases both in desperation and as a possible hedge – but this cohort appears to have achieved a bargain. The amount is significant too – 249 out of a total 3,549 = 7%.

 

London: average sales prices and volumes

After injecting a rare – for us – note of optimism regarding happenings in London, average prices fell, according to the latest month's figures from £474,957 to £474,601, a mere 0.1%. There isn't too much to say about this in and of itself, however the volumes figures once again represent a mini-paradox all of their own.

London's sales volumes increased month-on-month from 6,043 to 7,095, a more-than-considerable 14.8% and the biggest such rise since March 2017's 17.9%. We would therefore postulate that given this highly positive near 3-year high uptick in sales volumes, that holy grail of the housing market in England & Wales, that there would be a much bigger rise in prices rather than a fall, albeit of just 0.1%, ceteris paribus. Once again the likelihood is of explanations to be found elsewhere in the data.

Once again, we examined cash purchases where the latest month's figures were available and found that while prices rose 2.1%, (index rose from 114.67 to 117.09), sales volumes rose by a considerably higher percentage, from 1115 to 1377, i.e. by 23.5%.
Not only therefore did cash purchase themselves show this unexpected effect but also, this wasn't involving an insignificant amount of sales: it was in fact 162 out of the 1,062 total rise, i.e. 15%, double the rise in volumes compared to England and Wales in relative terms.

Perhaps it’s the cash buyers in both London as well as England and Wales – i.e. predominantly those at the richer end of the scale – which are the main cause of the rising sales volumes. And they are simultaneously taking advantage of unexpectedly low – if any – rises in prices?



It's almost as if those with the good fortune to have cash resources have, in desperation, finally gone ahead with planned purchases or have decided that buying properties is a good hedge against whatever outcome Brexit is likely to bring. And estate agents have been quite happy to take their cash without immediately boosting prices pour encourager les autres.



(article continues below...)

Inflation falls and nominal wages rise causing real wage rise overall

Housing market stakeholders can gain some optimism from a 0.18% month-on-month fall is the Consumer Price Index. At the same time, nominal wages rose by 0.4% month-on-month – to their highest level ever technically.

Overall, this means an overall real wage rise – something for the Government to savour perhaps – until long memories recall that real wages haven't yet risen above the levels of April 2008, i.e. before the credit crunch.

New mortgage approvals down, remortgages up

The direction of play for the latest available month's seasonally adjusted figures for mortgage approvals and remortgage approvals was fairly clear-cut.

Mortgage approvals fell to 64,602 for October, down monthly by 1.9% and yearly by 3.3%. Remortgages rose, to 51,272 in the same month, up monthly by 3.2% and yearly by 5.1%.

As discussed, cash buyers have increased but similarly mortgage buyers have clearly decreased. The fact of remortgages increasing, however, is a fair indication of uncertainty and people staying put, investing in their present properties.

Lifetime ISA outlives the Help to Buy ISA

(so a Government bonus is still available for first time buyers as long as you're under 40)

The Government rolled up its Help to Buy ISA (HTBISA) scheme 30 November, closing the ISA to new applicants. The flawed scheme (click to read about our part in flagging up a number of its shortcomings), which led to the creation of the Lifetime ISA (LISA), at least performed better than the latter, more modern scheme in that you could/can look to achieve the bonus element within a year, something you cannot do with the LISA.

Additionally the HTBISA scheme did not age discriminate unlike the LISA scheme; given that the average age of first time buyers is steadily rising, from late-20s to mid-30s, this is likely to be received with something less than a warm welcome by the older first time buyer.

Our advice – sign up to the Lifetime ISA (LISA) scheme while you still can!


NAEA – First Time Buyer Sales Fall, little other respite

The National Association of Estate Agents led with news that both the supply of and demand for housing, as recorded by its member branches, were both down, however the most recent monthly report led with the news that first time buyer sales had fallen 3% in a month.

Oh…and 85 per cent of properties ended up selling for less than asking price: history repeating itself in this way on a regular-as-clockwork monthly basis…



Andrew Boast, co-founder of SAM Conveyancing, said:


"On the very cusp of the General Election, it's commonly been spoken that this is the Brexit election and certainly a clear result is likely to give a clearer direction of travel...with a 'famous last words' caveat given not only the very real chance, still, of a hung parliament and the possibility, even with a majority government, of the 'best laid plans' unravelling royally."

"We would not wish to give a partisan perspective at this time and directly influence any reader who has yet to vote. Housing is not everyone's obsession, even if it is a desperate issue for so many and the lifeblood of untold sectoral employment types."

"Whatever the result, we wish the victors treat housing with the respect it so sorely needs - and radical, sustainable solutions which marry up solving the problems of people with desperate housing need along with revitalising the market in general for secure employment and even, dare we say it, fair profits to all who seek them." 

"So may the best players win - and don't forget the UK's desperate housing needs in the aftermath, Brexit or no Brexit."


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