The Bank of England has, as expected, cut its base rate to 0.25 per cent after a record seven years at its previous historic low of 0.5 per cent.
Today’s cut may be an important psychological boost to markets and manufacturers but it is uncertain what its impact will be on house sales.
Firstly, it is not clear whether high street mortgage lenders will follow suit and cut their interest rates for borrowers – most are under no compulsion to do so. Secondly, the number of buyers with tracker mortgages that to some extent mirror the movement of the BoE base rate is far smaller than before, as increasing volumes of people have arranged fixed-rate deals ahead of what many expected to be an interest rate rise, rather than a cut.
“Today’s rate reduction will have little impact on the mortgage market. Banks already have very tight margins and may want to focus on savers who are struggling to earn a decent return, rather than cutting rates further for borrowers” cautions Adrian Anderson, director of mortgage broker Anderson Harris.
Even so, agents have welcomed today’s decision.
Estate agents from around the country are reporting only limited damage to business or prices caused by the Brexit result of the EU referendum two weeks ago.
A survey of 132 agents and clients by property software firm DezRez – conducted a week ago when the impact of the referendum was arguably more stark than today – shows that 53 per cent had seen no effect from the Brexit result, and five per cent had actually seen an increase in activity.
Some 52 per cent expected some eventual impact in the form of some vendors or buyers pulling out of deals – although only a third felt this would mean that overall there would be less stock on the market as a while.
The Thomas Morris agency, operating across Cambridgeshire, Bedfordshire and Hertfordshire, claims a a surge in offers since the vote. Last Thursday, June 30, it saysthere were seven offers on properties accepted, around a 30 per cent increase on any given day at the same time in the previous month.
On average, offers across their seven branches are currently within five of the asking price with some offers-over.
“This is still very early days, and things will change over the coming weeks and months. However, where people need to move they will move and so far values haven’t dropped” claims Simon Bradbury, Thomas Morris director.
James Clarke of Plymouth’s Lang Town and Country agency is quoted in local media as saying: “I can only see the market slowing down if interest rates increase. But articles I have been reading report a further cut to interest rates is on the horizon and they are already at an all-time low. I can’t see a slow down for demand of property to buy. I believe it will stay relatively stable.”
At Tunbridge Wells in Kent, Heather Cernis of Jackson-Stops & Staff says both buyers and sellers have been pragmatic over the past two weeks.
“All transactions are progressing and on course. Post-Brexit, we have had a steady flow of new instructions and requests for market appraisals” she says.
ShareResidential property prices in the UK increased marginally in June, despite greater uncertainty in the run-up to the EU referendum, the latest figures show.
Nationwide’s monthly house price index revealed that house prices rose by 5.1% in June compared with the corresponding month last year, which marks an improvement on the 4.7% year-on-year growth recorded in May.
Month-on-month prices rose slightly by 0.2%, the same pace as in May but higher than the 0% consensus estimate.
“It has become difficult to gauge the underlying pace of demand in recent months, due to the surge in house purchase activity in March ahead of the introduction of stamp duty on second homes on 1 April,” said Robert Gardner, Nationwide’s chief economist.
“It will therefore be difficult to assess how much of the likely fall back in transactions in the quarters ahead is because buyers brought forward purchases to avoid additional Stamp Duty liabilities, and how much is due to increased economic uncertainty following the referendum result. Gauging the likely impact on house prices will be even more difficult.”
Many housing market analysts, including economists and estate agents, are rather pessimistic about the outlook, warning that the market could very well slump in the coming months following the outcome of last week’s vote. But any downturn in the market could present investors with some enticing discounts.
“Brexit may create opportunities,” said Ian Thomas, co-founder and director of LendInvest, the online property investment company. “It could result in the housing market cooling and resetting in areas where house price growth has locked out first-time buyers and others that want to purchase property.”
But while the vote to leave the European Union has come as a shock to many, the fundamentals of the UK housing market will not change abruptly, according to Thomas.He added: “People still need homes to live in, whether we are in the EU or not, and the fact is that demand for housing massively outstrips supply.”
Selling Your Property Just Got Cheaper, Fast and Easier
New research appears to confirm what many agents have thought for a long time – many prospective buyers take only five minutes during a viewing before deciding to put in an offer and try to purchase the property.
Research involving a survey of 1,000 buyers conducted for the developer Harron Homes found that some 43.1 per cent decide whether a house is or isn’t for them within the first five minutes of a viewing.
The research also lists what turns buyers on – or off – to a property at three different stages – looking online, seeing the property in person from outside, and then viewing the inside.
In terms of online surfing the research says:
– the biggest turn-off is if a listing does not have any pictures or has only low quality photos;
– 46.2 per cent said it was a problem if there was no floor plan online;
– 43.2 per cent said they wanted to see images of every room.
At external viewing stage:
– the research indicates realising upon arrival that there is no parking is a major issue for just over half of respondents;
– sharing of a driveway or garden is another deterrent for over 30 per cent;
– old-fashioned exterior walls such as pebbledash are also a turn off for over a fifth of would-be buyers.
The interior viewing:
– over 50 per cent reported that seeing or smelling damp is the most off-putting problem at this stage;
– the smell of pets can be similarly off-putting
– outdated interior features such as artex ceilings are unappealing;
– noise, a lack of storage, clutter and outdated fittings are also a turn-off to many.
Other complaints about problems during viewings include being pursued too closely around the house, seeing unprepared rooms or gardens which have not been tidied, or anything that could be described as dirty.
An increase in property sales in the first quarter of this year placed upward pressure on house prices in the capital.
The average price of a home in London has just passed £600,000 for the first time, according to analysis of the latest Land Registry data.
House prices in the capital have now risen by almost £100,000 since they first passed £500,000 in August 2014 – an astonishing rate of growth that equates to more than £1,000 per week.
Property price growth has been led by Greater London which grew by 14% year-on-year in the first quarter of 2016, and almost 8% over the fourth quarter of 2015.
House prices also increased in the Prime Central London (PCL) market, albeit at a slower rate, taking the average price of a home in the heart of the capital to a staggering £1,673,906. Growth was supported by a surge in transactions in the first three months of this year, up by a third quarter-on-quarter, as investors rushed to buy property before April’s stamp duty changes came into force.
Reflecting on the latest Land Registry data, Naomi Heaton, CEO of London Central Portfolio, commented: “Whilst making for somewhat staggering reading, the increase in sales is not actually surprising. Buyers, wanting to access the Prime Central London market, rushed in during Q1 to beat the 3% Stamp Duty deadline which created an uncharacteristic surge. This one-off anomaly is likely to be steeply eroded next quarter, magnifying the contraction in sales already anticipated across the rest of the year.”
Despite the latest hike in property prices, there are growing signs that London’s housing market may be running out of steam.
The number of homes changing hands looks set to fall as affordability becomes a growing issue for many Londoners.
“We are clearly hitting some affordability ceilings in London,” said Lucian Cook, director of residential research.
Richard Donnell, director of research at Hometrack, an analysis firm, agrees that that there are plenty of headwinds facing London at the moment.
“It’s down to affordability — at some point you have to run out of buyers,” he said.
Most analysts forecast that property values in London will rise further in 2016, but with prices in the capital now standing at 9.2 times average earnings, many may reassess their predictions in the coming weeks – possibly after the EU referendum.