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Property thoughts

UK house prices fall in May

 

This May, UK house prices dropped for the first time in three months, new data from Halifax reveals. The market is being characterised by and oscillating ‘push-and-pull’ effect as reduced supply forces prices up, straining finances and impacting sentiment.

House prices dropped by 0.1 percent in May having fallen last at a rate of 0.4 percent, in February.

Until May, the average house price was 2 percent more than the three months preceding before the growth rate began to slow once more.

Prices were 8.6 percent higher in comparison with March – May 2014; a 0.1 percentage point rise on April’s 8.5 percent.

Points of note

Considered on a three month annual basis, housing growth has remained at eight to nine percent since last October, with December (7.8 percent) the one exception.

Although current growth is less than 2014’s 10.2 percent July peak, it is astoundingly stable. A report by Nationwide, published a day before the Halifax study, indicated that annual growth had dropped to its lowest rate since August 2013: an annual rate of 4.6 percent.

From one angle, the reduced supply of houses for sale may be forcing prices up, but the 5.2 percent price-to-earnings ratio in April is sizeable; it wasn’t this high since April 2008. This shows just how overstretched finances are, which could result in capped price growth.

The Analyst view

Housing economist at Halifax, Martin Ellis, commented:

Housing supply remains extremely tight with the stock of properties available for sale currently at its lowest level for many years. At the same time, ongoing economic recovery, increasing employment, real earnings growth and very low mortgage rates are all supporting housing demand. This combination has kept annual house price inflation well above earnings growth although activity levels are subdued.

The imbalance between supply and demand is likely to continue to push up house prices over the coming months. Looking further ahead, the increasing level of house prices in relation to earnings is expected to dampen house price growth”.

In brief

There is a tug-of-war scenario: strained finances tugging one way and increasing demand, the other. This will most likely result in price growth remaining at eight to nine percent for some time to come.

Mortgage approvals at highest rate since April 2009

Despite uncertainty over the election, the amount of mortgages for new homes approved in April rose at the fastest rate since the same month in 2009, new research by the Bank of England has revealed.

Approximately 68,076 mortgages approved for house purchase in April, set in stark contrast to the equivalent figure for March, 61,945. This constitutes growth of 9.9%; the most dramatic monthly percentage change since 2009. The total number of mortgages granted also showed a marked increase and is the highest figure the sector has seen for 14 months.

Transaction value for home purchases also leapt to £11.1 billion; a rise of 7.9%. Lending value for house purchases is the greatest since last February.

Points of Interest

This peak appears to stand in contrast to popular opinion: that ambiguity over election results would produce a negative impact on buyer intentions.

Together with the greatest number of re-mortgaging granted since January 2014, the rise proves that buyers are emboldened by current low mortgage rates. Land Registry figures for April sales demonstrated gentle house price increases, rising 0.9% from March to April.

Analyst Outlook

Director of independent mortgage broker London Money, Martin Stewart, said he believed a mixture of low mortgage rates and a secure labour market would ensure a positive future for the housing sector:

“While there is certainly more caution in the market at present than a year or so ago — among borrowers and lenders alike — mortgage rates are so competitive that they are inducing people to commit to a home purchase.

We’re finding that borrowers are a lot more confident, too. Low and now negative inflation has had a tangible impact on household finances and people feel more secure in their jobs. Coupled with a low interest rate environment and you have all the ingredients for a strengthening property market.

As we enter the summer, I would expect the mortgage approval numbers to push on even further”.

A final point

Election uncertainty now looks to be fully resolved; we can expect both house price growth as well as mortgage approvals to step up a gear over the summer.

Was the election a win for first-time buyers?

Whatever your view of the outcome, the 2015 General Election result may hold positive news for struggling first-time buyers. Under a Conservative Government, aspiring homeowners will have access to a variety of schemes to help them set out on the property ladder. Originally due to finish next year, the ‘Help to Buy’ scheme will now extend until 2020 continue to bolster demand, boosting the construction industry and enabling the purchase of new builds. First-time buyers will be empowered under the ‘Help to Buy’ ISA, for which the government will endow £50 for every £200 saved towards a deposit, up to a maximum contribution of £3,000.

Additionally, buyers able to raise a five percent deposit will be eligible to apply for a five-year, interest-free government loan equal to 20% of a new build property’s value. In the sixth year, interest will remain at 1.75%, climbing at a rate of just 1% of that figure each year thereafter, plus any increase in inflation (as measured by the Retail Prices Index [RPI]). Borrowers are able to repay the equity loan at any time, and without penalty.

With just a 5% deposit to raise and the government protecting the lender should they default on payments, first-time buyers have a better chance than ever of securing a mortgage to buy their home. With plans for 1,500 homes to be built in Market Harborough approved in March, the dream of homeownership is set to become a reality for many first-time buyers.

Buying your first home

If you dream of owning your first home, we’d love to help kick-start your journey, visit Naylors Estate Agents on The Square, Market Harborough or speak to us now on 01858 450020

Rise in house prices could ‘spark sales’

Research commissioned by Halifax has found that consumer confidence that next year will be a good year to sell a property has reached a four year high.

This comes amid expectations that prices will continue to rise in the coming year. 59% of people who participated in Halifax’s Housing Market Confidence Tracker felt that it was a good time to sell a home, with just 26% thinking the contrary.

The research, which has been conducted throughout Britain, could serve to address recent concerns about a lack of suitable homes for buyers to choose from. The Royal Institution of Chartered Surveyors was one such body who voiced these concerns, stating that is has seen signs of a ‘worrying’ upward pressure on house prices due to this lack of homes.

House price expectations were strongest in the south east, as well as commuter belt areas such as Market Harborough. 49% of respondents in the East Midlands felt that prices would rise.

Whilst house price rises may not immediately seem to the benefit of the buyer, this does mean that many more properties will become available, and that next year will be the perfect year to put your house on the market.

Specialists in selling properties

Naylors Estate Agents are specialists in selling properties within the Market Harborough area. To find out more about what we have to offer, call us on 01858 450020.

The end of HIPS

So, it’s happened at last.  The demise of the home information pack (hip) and the return to agents being able to list properties as soon as they are instructed, subject to a few small and non time delaying administration points.

As announced last week the new coalition government has implemented one of their mutual policy objectives and have announced the suspension of the hip with the intentions of scrapping them completely in due course.  All that remains necessary for estate agents to act is to confirm their instructions in writing, complete anti money laundering identity checks and order an energy performance certificate.

There will be some delight in the estate agents office throughout the country at the removal of the regulation and of course pleasure with all sellers that have now saved themselves the £200 to £300 hip cost.  However buyers might be a little less pleased as many of the costs associated with a conveyance will now revert back to them.  These include local authority, water and sewage searches.  What is gained on one hand is lost on the other!  Particularly I think of first time buyers.

As an estate agent I am saddened at the demise of the hip for a number of reasons.  Most importantly I believe hips have speeded up the transaction between ‘under offer’ and ‘exchange’ and further more have reduced the ‘fall through’ rate of properties in the lead up to exchange of contract.  Delay and disappointment is stressful to our clients and of course bad for us.

I’m also sad to see the link between conveyancers and estate agents drift apart.  Hips required us to start the team work on instruction.  It cannot be helpful to revert to the old system of conveyancers learning of their client’s sale plans the morning the notification of sale arrives from the estate agents.

What will the removal of HIPS mean?

The most interesting observation going forward will be whether the removal of the hip will bring more property on to the market.  As has been stated in this column over the last few years the market is desperately short of listings, resulting in inactivity as sellers have not put their properties on the market for fear of not finding a new home go to.  Will the new political stability, summer weather, removal of hips mean a flood of properties coming to the market?  Would such a flood of properties be good for the market and prices anyway?  Time will tell but I think the loss of hips will not alleviate the economic concerns, lack of mortgages or issues of affordability which have frustrated the market for the last few years.

Finally I would suggest that if the new government is keen to remove bad laws then they would do well to address the issue of VAT on listed building repairs or the unworkable Hunting Act.

The Land Market

One property sector that continues to defy all expectations is the rural land market.  In this respect we are referring to farmland for the growing of crops and keeping of livestock.  There is also the smaller amenity land market which is targeted to horses, smallholders and leisure uses.  Again this sector has continued to defy predictions and has been holding its value and, if anything, we have seen an increase in the demand for it.

Commercial farmland ranges from around 30 to 150 acres and is much in demand as this is the sort of area that can be incorporated into most existing farming systems.  This means a spreading of costs, such as labour and maximisation of the machinery capacity.  Most farms have excess capacity and therefore the additional land can be worked to gain extra profitability and efficiencies.

We have seen agricultural land prices of around £6,000 to £7,500 per acre.  Existing buildings will add extra benefits and could hold long-term potential for alternative uses subject to highways and planning.

The pony paddock market is orientated around parcel sizes or 3 to 15 acres and will normally be in grass.  The new owners with be non commercial and will be buying to enjoy the land and their hobbies on it.  Whether is it as a smallholder or with equestrian interests, the land gives them the potential to develop facilities like stables and buildings.  Again there will be planning aspects to consider.

We have seen prices for £8,000 to £15,000 per acre and beyond. Once again with the addition of stables or buildings this will add greater value.

Land, naturally, is site specific and there can be a wide variation in the final selling price.  Land in areas with less demand, poor access or heavy and water logged soils is less valuable.  All these factors will contribute to the value of the land.  Equally when there are two neighbours completing or it is close to urban areas then demand can be far greater.

Limited opportunities for land acquisition

We have sold a number of small parcels of land and have been very satisfied that the acquisition allows people to further their business or amenity interests.  The ownership of a small part of countryside can bring huge enjoyment.  The great concern though is that there are only small numbers traded each year, say within a 15 mile radius of Market Harborough, I would suggest that there may only be 10 opportunities through the year.

What is so great about Market Harborough?

It was driving back from a viewing on Saturday morning along Northampton Road that made me realise how fortunate we are to live and work in Market Harborough.

I had just met a young couple who had not visited the area before; one of them works in Peterborough, and the other in Birmingham, so Market Harborough seemed a sensible place for them to look for a home. The delights of the town were discussed- an attractive and active town centre, excellent rail and road communications, good restaurants and retail, and schools for all needs- this was an easy sell.

Further positive factors are the pleasant environment, open spaces, variety of accommodation, and the easy going and helpful residents. We are incredibly fortunate to live in this town and when the sun is shining our jobs are made so much easier.

We are experiencing very strong demand as a result of these factors. We are recording the most applicants and have the highest under offer book since August 2007.

Will these conditions continue? I don’t have a crystal ball but I do know that there is a general election in May 2015 and that the only way interest rates are going is up which may be sooner rather than later.

Home owners considering selling

For owners considering selling, now is the most positive time in terms of buyers and price that I can recollect in recent years. Let us hope for a good summer and what will be many more new residents for the future.

The Language of Property

Like many businesses, for those of us that are involved in property transactions every day there are some terms and expressions that we use to denote a particular position. The purpose of this week’s market thoughts is to explain some of these terms.

Cash buyer

This is a purchaser with money in the bank or in readily accessible funds such as shares or pension assets.  It can also include buyers who have exchanged on their property meaning that there is a high chance of money being paid to them in the near future.

Buyer subject to finance

This is someone who will apply to the bank for funds. This will be subject to a detailed application and verification.  The security on which the mortgage advance is to be made will also be subject to a valuation.

Buyer subject to sale

This is the highest risk category as the level of sale proceeds and the timing of that sale are beyond the control of the seller. The existence of a buyer in this position results in a chain.

Under offer/ Sold subject to contract

These two phrases are very similar. The seller has accepted an offer from a party that has the means to progress to an exchange of contracts. It is not a legally binding contract nor has any money exchanged hands. This is the start of exclusive negotiations; while the price and purchaser have been agreed the legal, mortgage and practical aspects of the sale need to be resolved.

It is wrong to say that a property is ‘Sold’ until after exchange of contracts; that is why I prefer to say ‘Under Offer’, as until the money is handed over no property is completely and legally sold.

Exchange of contracts

This is the point at which the two parties enter a binding legal agreement. A deposit has normally been paid, and most importantly a completion date or method has been set.  The buyer and seller can be highly confident that they will progress on to completion.

Completion

This is the point at which legal ownership is transferred from one party to another. All of the money had been paid over and the property has been vacated in accordance with the agreement for sale.  The packing up will have been completed, the meters read and the keys left at the estate agents for the new owners.

These are the most common terms that buyers and sellers come across. It is important people know their meanings in order to accurately describe their positions and allow deals to progress more smoothly.

Closing the Gap

Some people suggest to me that as an Estate Agent, properties sell themselves and that our role is overpaid and unnecessary.

In some senses I agree that a well presented correctly priced property does sell itself.  A good property in a fine setting at the correct price will generate a lot of interest and therefore sellers are able in some respects to settle back and let the buyers compete for the property.

However, what I do know is that properties whether houses, flats or land will not just glide their way through the conveyance process without the hard work and leadership of an Estate Agent.  There are always too many challenges whether from the seller, the buyer, the chain, the Solicitors or Lenders to have such a laid back attitude.  An Estate Agent’s role will vary from sale to sale but over the last few months the biggest challenges have been getting the properties to exchange of contracts.

Challenges & solutions

We experience a range of problems which all require different solutions.  In addition we have a very wide range of sellers and buyers all of which need handling in different ways.

The biggest challenge is normally managing the chain, here communication and trust is needed to ensure that everybody’s intentions and timing are the same.  This takes time and skill to keeping everyone together is sometimes equivalent to herding cats.

Finance is the next biggest challenge. Arranging, verifying, renegotiating and reappraising of finance has all been undertaken with sales over the last few months.  Highlighting market conditions, discussing comparable properties and working with Valuers and Surveyors are all skills needed in this area.

Missing paperwork such as consents and warranties all take up time.  Such paperwork is necessary in order that conveyancers can fully comply with their obligation to the lenders and the buyers.   Here we need communications to inform people that the paperwork is being addressed and will be either found or replaced as soon as possible.

There are countless other challenges that an Estate Agent faces on all sales and for all the skills in handling people it is perhaps experience which is unique to the estate agent.  So the answer to the overpaid and unnecessary suggestion is that it is only when the going gets difficult (as it invariably will) will you see the expertise for which you are paying.