Signs of London recovery but could Carney’s comments put the BRAKES on UK property market?
19th September 2018 | 12:00am
19th September 2018 | 12:00am
WITH the ongoing wrangling over Brexit having taken a toll on the London and commuter belt property market for over two years, it seemed as though the news of a potential breakthrough in negotiations with the EU had provided a lift in the fortunes for the Capital, as data released this morning from property search portal Rightmove points to a recent slight upturn in buyer activity over the last month.
However, some are now suggesting, Mark Carney’s stark warning last week of the impact on the UK property market in the event of a no-deal Brexit may have slammed the breaks on any such imminent recovery - for the short term, at least.
Whilst the most recent Rightmove data suggests that asking prices in London and its commuter belt still decreased over the last month by 0.5 per cent on the same period last year, it also points to a modest upturn in the number of sales agreed recently.
This would perhaps indicate that those at entry level and also the top end of the market – where prices have been hardest hit since 2016 – had been sniffing out bargains and striking deals, perhaps betting on the fact that the market had reached its floor, and coupled with still competitive rates of borrowing, have been taking the plunge whilst conditions are still favourable.
This surprise increase in buyer activity in London over the last month at the upper end of the market would have been encouraging for some, with properties sold at £750,000 or above accounting for a fifth of all transactions in the Capital.
Looking at the Rightmove report, it appears that sales agreed at this level have increased by six per cent on the same period last year, although inner London asking prices have reduced from their previous high in February 2016 of £823,000, and are now £756,000, which has potentially assisted buyer affordability.
Brian Murphy, Head of Lending for Mortgage Advice Bureau observed: “Renewed activity in the Capital may possibly be a sign of first time buyers and second steppers taking advantage of price drops over the summer, coupled with the still-competitive rates available from lenders.
“Likewise, at the upper end of the market, it seems that where significant reductions from motivated vendors have occurred, there are buyers out there willing to transact, meaning that deals are out there to be done.”
However, Brian cautioned: “It’s important to make the distinction between an increase in activity and an increase in house prices – whilst the Rightmove data points to the first green shoots of the former in London, there aren’t many signs of the latter as yet.”
However, as consumer sentiment fuels both property price bubbles and downturns, it seems that the Governor of the Bank of England’s forecasts in the event of a ‘disorderly’ Brexit may now undermine buyer confidence in some areas of the country over the next few weeks until clarity around a deal is reached.
Reaction from the property industry to Carney’s comments has varied over the last few days, with some supporting his view that a no-deal Brexit would be disastrous for the UK housing market, and that Theresa May needs to push for the best deal possible in order to avert another financial crisis similar to – if not worse than – 2008.
Jeremy Leaf, former RICS residential chairman suggested: “Crashing out of Brexit without a deal gives us the worst of all worlds. It will play on people’s confidence and make things even more difficult for the housing market.
“Everything will come together and conspire in what is already a falling market and people won’t know what to expect so will sit on their hands, which will make things even worse.”
Others however have suggested consumers will continue to buy and sell houses regardless of Brexit, and pointed out that Carney’s remarks have been taken out of context, suggesting that in the modelling of forecasts he was reviewing all potential outcomes, both in the event a deal is reached with the EU but also should we find ourselves in a hard Brexit scenario, therefore a potential drop of 35 per cent in property values over the next three years was just one of a range of possibilities, not all of which are as negative.
Simon Tollit, director of estate agency Tedworth Property observed: “Mr Carney's warning is a worst-case scenario. Undoubtedly prices have fallen significantly from their peak in the third quarter of 2014 and while uncertainty remains from buyers and prices are subdued, transactions are still taking place.
“Day to day, many people are taking this sort of scaremongering with a pinch of salt and getting on with their lives. Arguably, whatever happens with Brexit, the outcome should provide some form of clarity allowing people the chance to make informed decisions.”
Outside of London and the South East, where the UK’s decision to leave the EU has had more of an impact on property values than elsewhere in the country, according to Rightmove’s data areas such as Yorkshire and the Humber, Wales and the Midlands all saw asking prices continue to rise over the last month with average annual increases of at least four per cent as consumer confidence remained buoyant.
Miles Shipside, Rightmove director commented: “Buyer affordability has been increasingly stretched by seven years of national average property price rises outstripping buyers’ average wage inflation.
“However, in London, after asking prices rose by over 50 per cent between 2011 and their peak in 2016, there have been two years of subsequent price falls in parts of the Capital.
“Now, there are signs that these price reductions in parts of London have led to an upturn in buyer activity as sentiment improves.”
Miles continued: “Buyer affordability ratios were not stretched to the same degree in the Midlands and the North than they were in the South, with a comparatively modest average price increase of 21 per cent since 2011.
“This has left some price momentum fuel still in the tank in these regions, and means that the current momentum has the mileage to carry on into this Autumn.
“That compares to the seven-year 40 per cent plus price binge seen in London and its commuter belt neighbours of the South East and East of England, which is the cause of their current indigestion.”
As for what this all holds for property prices and those aiming to buy and sell before Christmas, it’s highly likely that those mid-transaction will carry on regardless.
After all, the factors which made them decide to move home are unlikely to have changed, therefore to an extent, none of this makes any difference to those who need to purchase a main residence that they intend to live in for the next few years.
However, there may be some who will choose to wait until later this year before making their decision, potentially leading to a bottleneck in both supply and demand until the UK’s divorce deal is finalised.
Source: The Express