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OPINION

Home owners sit on their hands

Home owners sit on their hands
January 19, 2017
Home owners sit on their hands

If we look at the existing housing stock and not the new build market, enquiries from potential buyers have been steadily rising in the last few months of 2016. But the problem here is that there has been no sign of any corresponding increase in the number of sellers. For the most part, existing homeowners seem happy to sit on their hands. In fact, sales instructions have risen in just five of the last 36 months, which leaves the number of homes for sale on the market close to the lowest level on record. The contrast between the two can be partly explained by the fact that potential buyers still want to get on the housing ladder, but existing owners are pretty wary of moving higher up the ladder by selling their existing home and taking on a bigger mortgage; something borne out by the fact that mortgage approvals have remained pretty static. It may also be that the increase in prices has curtailed sellers looking to move up the ladder simply because they cannot afford a bigger mortgage. Sentiment is also affected by employment trends, and while average earnings have been outstripping inflation, that's unlikely to last, or at least the gap will close as inflation rises. Meanwhile, employment growth has slowed to just over 1 per cent year on year, around half the pace recorded six months earlier.

Through all of this, the one prevailing indicator is that house price inflation is slowing, but with demand continuing to outstrip the supply of houses on the market, there is unlikely to be any real fall in values, apart from the frothy end of the London housing market.

There are external influences also playing a part in arriving at valuations. On the good news side, houses close to the new Crossrail Elizabeth line have enjoyed a significant increase over and above those seen in surrounding areas. House prices in areas around Brentwood in Essex, which is just one stop up from where the new line terminates, have risen by nearly 54 per cent in the last three years, according to estate agent Beresfords. The new line terminus is Shenfield, which is already an expensive area. Average prices there rose by 34 per cent, putting a three-bed semi-detached house at £600,000 against the national average house price of nearer £216,000.

However, it's not quite such good news for homeowners served by the nine railway lines operated by Southern Rail. Regarded as a poor performer, Southern Rail has been further blighted by a spate of industrial action. The situation has deteriorated to the extent that some London-based employers are avoiding, where possible, new job applicants travelling on these lines. Using data from Zoopla, online estate agent eMoov.co.uk has identified a deteriorating trend in house values. Over the past year, properties in the Southern Rail area have risen by 6.5 per cent compared with 7.6 per cent in the rest of England. But in the last six months, prices in England rose by 3 per cent and those in the Southern Rail area rose by just 1.4 per cent.

Looking at the whole UK market, it seems likely that transactional volume in 2017 will continue to fall, especially as buy-to-let transactions decline in the face of higher taxation. And the mix reveals some interesting facts. Last year 26 per cent of all transactions were made by first-time buyers with a mortgage, while home movers with a mortgage made up 29 per cent. Buy-to-let transactions with a mortgage were just 10 per cent of the market, while cash buyers were the biggest group, accounting for 35 per cent. According to Savills, transactions last year of 1.24m are expected to have fallen by the end of 2018 to just 1.04m before recovering to 1.24m by 2021.