Recent events in May can be summarised in one word – ‘unpredictable’; in both a political and economic sense which is likely to have a profound affect on the market for the rest of 2010.
The impact of a coalition Government has so far brought mixed fortunes to the UK housing market. The election result itself has signalled an end to weeks of uncertainty and speculation, and for many homeowners has acted as a milestone from which they can proceed with moving plans.
The new Government’s swift action in abolishing Home Information Packs has been warmly welcomed within the property industry and is likely to entice more sellers into the market. Rightmove has already reported a 35.4% rise in new listings in the week after the announcement compared to the week before. Garrington also predicts a rise in off- market activity where tentative sellers can now freely explore sale options without incurring up-front costs.
The speculation on the potential rise in Capital Gains Tax, to be announced in this month’s Budget, has however brought a cloud of uncertainty over parts of the market, in particular in the investment sector. Owners of investment property are carefully evaluating whether it is more advantageous to sell part or all of their portfolios. This has naturally caused speculation that we are about to see a deluge of stock entering the market which could depress prices. Much depends on whether the Chancellor bows to pressure to differentiate between the taxation of short term as opposed to long term gains.
Land Registry data confirms that transaction volumes are improving with sales volumes in England and Wales averaging 53,137 a month from November to February, marking a significant increase on the average of 32,089 a month for the same period a year earlier, but still way below the peak of around 120,000 a month in the Spring of 2007. This trend of rising transactions is a useful and important indicator of rising confidence in 2010, albeit that it could suppress further significant price increases this year as the market becomes more balanced.
This phenomenon appears to be present across the entire market and Garrington has witnessed more property being launched to the market across its operating areas. Prime Location’s Prime and Platinum index reported that stock was 56% higher in May 2010 than at the same time the previous year.
Parallel to this is a noticeable uplift in buyer enquiries with many taking a longer term outlook in relation to their purchasing decisions with this move set to have a 15 to 20 year duration. This is certainly in-keeping with trends recorded over recent years where traditionally mid-year sees those with families looking to conclude any property transaction ahead of the autumn school term.
Such drivers therefore outweigh many of the economic factors for this type of buyer as the catalyst for them is a lifestyle decision with other factors of a lesser importance. These buyers are ready to proceed and seek best advice to ensure they secure their ideal property quickly and efficiently.
Therefore as we move forward into Summer, activity in the market can be categorised by two different groups of buyers: those who are ready and able to proceed, seeing now as the moment to strike with more stock to choose from, relatively favorable mortgage rates and ahead of possible Stamp Duty rises; and a second more cautious group who have intent but are not ready to take action. With dramatic falls in the FTSE in May set against the backdrop of the Euro crisis and mounting inflationary pressure which could affect interest rates, these buyers are waiting for clarity from the June budget, and ultimately looking for greater stability in the market before moving forward with their plans.
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