The annual pace of house price growth remains in the fairly narrow range between 3% and 5% that has been prevailing for much of the past 12 months, according to the date from the Nationwide, one of the leading home lenders in the UK.
‘In the near term, it’s going to be difficult to gauge the underlying strength of activity in the housing market due to the volatility generated by the stamp duty changes which took effect from 01 April,’ said Robert Gardner, Nationwide’s chief economist.
‘Indeed, the number of residential property transactions surged to an all-time high in March, some 11% higher than the pre-crisis peak as buyers of second homes sought to avoid the additional tax liabilities,’ he pointed out.
‘While cash purchases accounted for a significant proportion of the increase in activity it is not possible to determine whether or not these were purchased by landlords. Mortgage data suggests that, while buy to let purchases were a major driver of the increase, the purchase of second homes also accounted for a substantial proportion,’ he explained.
The report also shows that the number of home mover mortgages, which is where second home purchases with a mortgage would show up, increased sharply in March.
Gardner said that house purchase activity is likely to fall in the months ahead given the number of purchasers that brought forward transactions. ‘The recovery thereafter may also be fairly gradual, especially in the buy to let sector, where other policy changes, such as the reduction in tax relief for landlords from 2017, are likely to exert an ongoing drag,’ he added.
But he also pointed out that healthy labour market conditions and low borrowing costs are expected to underpin a steady increase in housing market activity once stamp duty related volatility has passed, providing the economic recovery remains on track.
‘However, it is possible that the recent pattern of strong employment growth, rising real earnings, low borrowing costs and constrained supply will tilt the demand/supply balance in favour of sellers and exert upward pressure on price growth once again in the quarters ahead,’ he said.
He added that according to the Royal Institution of Chartered Surveyors (RICS), the number of properties on estate agents’ books was already close to all-time lows on data extending back to the late 1970s.
According to Matt Andrews, managing director of Bluestone Mortgages, consumer confidence is still rising, so with more people looking to secure lending it is important to see some innovation come into the sector to help more people get onto the housing ladder.
‘In order to help those who currently struggle to gain access to lending, such as people who have experienced a genuine blip on their credit scores, or who only have limited trading histories, we need to offer a more in depth underwriting experience,’ he claimed.
‘This would ensure their specific circumstances are fully understood, and allow lenders to provide tailored and affordable mortgage options suited to their individual needs,’ he added.
Russell Quirk, chief executive officer of eMoov, believes that it is interesting that despite the artificial skew of April’s stamp duty deadline having been and gone, UK house prices have continued the upward trend that has been prevalent over the last year, increasing month on month again, albeit gradually.
‘There has been a lot of talk about how the market may come to a shuddering halt now that April's spike in activity is behind us, however, I don’t believe that this will be the case. There’s no denying that April’s change in stamp duty thresholds created an abnormality in market activity, but I don’t think it has brought about the death of the buy to let and second home market let alone the UK market as a whole,’ he said.
‘When you also consider that we are entering what is seasonally the busiest time of the year for property transactions, I think the engine room of Britain’s property market will continue to trundle along at a steady pace, even if it does take a while longer to get up to speed than it may have in previous years,’ he explained.
‘Whilst interest rates remain at a mouth-watering low and the government continues to pump this feel good factor into the UK economy, the dangerous imbalance between housing demand and supply will remain out of kilter and continue to push house prices up. Britain remains an aspirational home owning nation and neither an EU yes or no vote will change that,’ he added.
Mark Posniak, managing director at Dragonfly Property Finance, thinks the Nationwide index is surprisingly upbeat. ‘At 0.2%, house price growth in May was negligible but the broader prognosis given by the Nationwide, specifically that the market could favour sellers, is out of sync with the doom-mongering of various property market commentators,’ he said.
‘The volatility caused by the recent stamp duty changes on buy to let and second homes, coupled with the EU referendum this month, has certainly made 2016 a difficult year to predict. The perennial issue of weak supply has the potential to act as a glass floor under house prices,’ he explained.
‘Affordability is a massive issue in many areas of the country, particularly the capital, but it is being counterbalanced to an extent by continued low borrowing costs. What's hard to deny is that the result of the EU referendum could have a material impact on house prices in the short to medium term. What happens in June could determine the fate of the market for several years to come,’ he concluded.
