Property market to make hay whilst the sun shines

5 min read
England and Wales
Average House Price
Most recent Land Registry data March 2020
(record high up 4.6% YOY)
(up 2.1% YOY)
Average Sales Volume
Most recent Land Registry data Jan 2020
(down 6.6% YOY)
(down 5.2% YOY)

Since the 21st May when the Government allowed estate agents to open their doors again the housing market has seen a surge of buyer interest. Those buyers mid-transaction picking up tools and finishing off and those new buyers who held off waiting to put an offer in.

We all want to believe things are going back to normal when:

  • Most mortgage valuations are coming in at offer price
  • Buyers wanting to close at the same price they originally offered
  • Negotiations fight against buyers with higher bids

...however, we are yet to see the housing market data for April, May and June and with the phased removal of the furlough scheme from 1st July the media reports of redundancies cannot be ignored and in May the Bank of England stated House Purchase lending is down 86%.

This unique post Brexit, post lock down bubble will see a make hay whilst sun shines approach for buyers who can get a mortgage and finish their transaction whilst we all anticipate a decline in October amidst fears of redundancy, a second lock down and falling house prices.

A few days after posting this article we see a budget this Wednesday where we are told SDLT will be changing - more Government help for buyers or is this a deferred tax liability (holiday)?

Bank of England Reports 86% fall in lending
There were 9,273 loans agreed for house purchase in May 2020 compared to 65,184 in the previous year. It is clear to see the impact of mortgage lenders not offering mortgage products with lower than a 90% loan to value (In April there were some only offering 60%).

Whilst lending restrictions are lifting with a wider variety of mortgage products including those for 5% Help to Buy, the housing market could be slow to react amidst fear of job losses.

Remortgages were equally effected as BOE reported a fall of 37% YOY to 30,368. Whilst the BOE base rate is low some home owners will look to secure low rate mortgage opportunities where they can however some won't be able to with such a volatile working environment.

Whilst the overall lending numbers are bad these have to be seen for what they are; the housing market was growing well before the Coronavirus outbreak however the market was put into freeze by the Government's lock down. June lending will bounce back, however to what levels we do not know yet.

Help to Buy hold off funding 2021 developments
Last month Help to Buy South was rescinding ATPs (authority to proceeds) due to a recent change in the Help to Buy Scheme criteria that requires all build completion dates must be prior to 31/12/2020 and all legal completion dates must be prior to 31/03/2021.

The move could be to focus first time buyers on buying the housing stock that is already built, FIFO style, however it does raise a concern as to how the Government views the housing market in 2021.

Play short and safe, however this could lead to a slow down in new developments being built as developers don’t want to have empty housing stock.
Estate Agents Standing Firm
We are seeing first hand estate agents standing firm supporting sellers against price reductions from buyers, however this will only work whilst there is interest from new buyers. Buyers will need to have a better plan to negotiate than just to blame Covid-19 as there are other buyers who are quick to make an offer, certainly in the South East perhaps less so in the rest of England and Wales.

We will see greater falls in house price offers the fewer buyers there are – the current redundancies levels are softened by the Government furlough scheme. The cold hard truth is that once the financial support is pulled more employees will be made redundant.

NAEA Reports Again
The National Association of Estate Agents (NAEA) stopped their Housing Report for March and April whilst estate agent offices were closed. The May 2020 report shows what has happened since the offices have opened back-up:

  • Average number of sales agreed fell by 44% in May compared to February
  • Housing stock fell by 15% YOY per branch to 41
  • Housing demand up 12% YOY per branch rising to 307
  • 70% of properties sold for under asking price in May

Whilst housing demand is up we need to see fresh housing stock and an increase in sales agreed. Properties being sold under asking price is not unusual and in May 2019 81% sold under asking so this year estate agents are holding firm on price drops. This however may impact this final statistic where 61% of estate agents have seen an increase in the number of sales falling through since the Government imposed a lock down. Could a more flexible strategy save a chain from falling through?

No New Build Data
Ministry of Housing, Communities & Local Government Live tables on house building of new build dwellings hasn't been updated since the 3rd April 2020 and the June 2020 next update isn't showing the most recent new build data for the first quarter of 2020.

In 2019 there were 178,790 new builds completed, however with Help to Buy pulling funding for 2021 will we see the same levels?

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

"Whilst we see properties selling for close to asking price we are all keeping an eye on the horizon ahead  ."

"The sun is definitely shining this summer in some areas of England and in these areas the housing market is busy with pent up demand from buyers and thankful sellers."

"Estate agents have gotten to grips with how to handle viewings, property prices haven't tumbled yet and conveyancing staff are coming back from furlough"

"The question is how long can the housing market carry on like this when there are so many employees being made redundant and mortgage lending is so low? Are we going to have enough fresh housing stock for 2021? Right now we are all trying to make hay whilst the sun shines however be prepared for a stormy Winter."

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