March 2017

There are many positive signs in the recent housing market data, even evidence that buyer confidence is finally growing and the housing supply increasing. How much of this is due to the issuing of Article 50 is worth debate and should give reason for caution.

Sales volumes are certainly up in England and Wales and London month-on-month: 5.7% and 3.6% respectively, a considerable rise given the previous month's falls of 8.9% and 8.6% respectively. The year-on-year perspective still shows shrinking sales volumes for both England & Wales and London for the last 8 months.

Regarding prices in England & Wales, although rising 0.2% less than last month at 0.7%, they are, year-on-year, 6.4% higher, which is 0.4% higher than the year-on-year figure for the previous month. London, however, saw a larger rise of 2.9% month-on-month compared to 1.3% in the month preceding and a 7.3% year-on-year rise compared to the 5.9% of the preceding month (all data taken from the most recently available data from the Land Registry House Price Index).

The average house price in England & Wales is presently £229,520 and in London it is £490,718.

The NAEA's monthly Housing Market Report's headline claimed a 10 year high in sales volumes, with an average of 11 properties sold per branch in February, compared to January's 8 per branch. The last time sales were higher than 10 per branch was in September 2007, hence the NAEA's claim that buyer confidence has finally turned a corner.

Some 74% of properties sold in February were sold under the asking price - i.e. the majority - and this has increased from 64% in February 2016. This is possible evidence that even if prices are rising slightly, the rise is 'soft', because buyers are not paying full price - and this is less than fully recorded.

The NAEA also claimed a 16% month-on-month increase in the supply of properties in February, when there was 44 per branch compared to January's 38. This claim was also bolstered by the year-on-year figures, which show a 26% increase - last February, there were 35 properties per branch.

Additionally, demand has remained steady, according to the NAEA, with members per branch staying at 425 for the second month in a row. Year-on-year, this is actually down 8% from the 463 per branch of February 2016.

Taken together, all the recent data for sales volumes, selling prices, supply and demand might give many stakeholders reasons for optimism about the health of the UK housing market. The trouble is, Article 50 has just been announced, meaning that many may be taking preemptive hedging action.

Some might consider it prudent to sell now, to give them more liquidity in their assets for future investment choices. Additionally, demand may have softened for a short while as people similarly choose to hold on to their cash reserves in an uncertain time or even in the hope that prices might fall, giving them greater buying power.

Halifax has produced research claiming that first time buyers are at record levels, with 335,750 buying their first home in the last year.

But the lender's research also claimed that the average first-time buyer deposit has more than doubled over the past decade from £15,168 in 2006 to a hefty £32,321 in 2016, an increase of 113%.

The NAEA additionally claimed that the proportion of sales made to first time buyers in February dipped to 22%, down from 30% in January.

Mark Hayward, Chief Executive of the NAEA said: "First time buyers need to be a priority – the number of sales made to the group dipped in February when it should be growing. As house prices continue to rise, the market’s most vulnerable buyers are being priced out and the only way to address this is to increase housing stock."

The English Housing Survey's findings are more worrying for most market participants.

The most recent survey, released by the Government's Department for Communities and Local Government, stated that the overall ownership rate fell to 62.7% for 2016 (the most recent figures available).

This is the lowest rate since 1985 and a marked decline from the peak of 73.3% recorded for 2007.

Potential buyers are also likely to be put off further from spending as March turns into April, with council tax and water rates as well as TV licence fees all increasing.

Andrew Boast, Co-founder of SAM Conveyancing said: "On the face of it, the most recent figures might give many cause for celebration. Many frustrated first time buyers, would love to see a continuing net increase in the supply of houses leading to a fall in price. Estate agents, surveyors and conveyancing solicitors among others will all welcome the increase in sales volumes.

"The down side is that no-one can be entirely sure what the larger market players are going to do now that Article 50 has been issued and Brexit starts to become a reality. These trends would have to continue for many more months. The overall decline in home ownership is also worrying, particularly given the less than stable nature of the rental market. The Government has to give very firm and consistent support to the housing market and to help first time buyers in particular, otherwise many in the rising generations are likely to become increasingly despondent about their chances of ever achieving home ownership."

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