While most of the housing market began the year with a subdued outlook, buy to let bucked this trend and was the strongest performing sector with 37% growth in activity since the previous month, and on an annual basis the smallest dip of just 4%.
It means that the sector has bounced back from a disappointing performance in December 2014 when it recorded one of the biggest monthly falls, according to John Bagshaw, corporate services director of Connells Survey & Valuation.
He believes that as landlords are now ‘spoilt for choice’ with a record number of mortgage products to choose from, they are beginning to invest more. Low mortgage rates have also continued, posing even more attractive deals for potential landlords or those expanding portfolios.
The first time buyer sector of the housing market was the only other sector which saw a monthly increase in valuations activity. On a month on month basis, activity for first time buyers increased by 3% though on an annual basis it saw one of the biggest falls of 28% compared to January 2014.
‘First time buyer activity increased on a monthly basis despite a stark contrast in performance with January 2014 when this sector had dominated the housing market. This was largely due to the flurry of activity as customers rushed to secure deals before the Funding for Lending Scheme (FLS) stopped mortgage funding at the end of January 2014. At the time the policy had boosted the housing market, particularly first time buyers by lowering mortgage rates,’ said Bagshaw.
‘Since then however, a series of policies have been introduced that have restricted lending criteria which have affected first time buyers more than other sectors and consequently had a major impact on demand. However, this month on month growth is encouraging and indicates that as the sector stabilises and adjusts to the new regulatory landscape, it should continue improving in the coming months,’ he explained.
By contrast, activity for those already on the property ladder has been subdued. On a monthly basis activity dipped by 4%, though compared with January last year, valuations activity fell by a steeper 23%.
Similarly, remortgaging saw one of the biggest falls in activity both on a monthly and annual basis. Since December, recent activity fell by 25%, while compared with January 2014 it decreased by 28%.
‘The current economic outlook indicates that low inflation and therefore the low Bank rate will continue for some time. As a result it appears that this is giving rise to optimism as more borrowers anticipate that lenders will be able to lower their mortgage rates even further. They are now waiting before securing a deal,’ said Bagshaw.
‘However, it is worth noting that current mortgage rates might not get any cheaper as the deflation in the Eurozone may affect swap rates soon. As many households look for ways to cut monthly costs, taking advantage of these rates now is a good idea,’ he pointed out.
Overall, the total activity in January saw a 4% fall since December 2014 while on an annual basis activity was down 23% but Bagshaw explained that the expected post-holiday pickup in activity failed to materialise with the market making a very restrained start to the year.
‘Mediocre comparisons are due in part to the exceptional performance seen in January 2014 as a result of a healthy pipeline at the end of the third quarter of 2013. In contrast, the transaction market slowed dramatically towards the end of last year. However, this slow start is not a cause for alarm as January is typically a slower month with lower volumes of activity,’ he concluded.
