House prices set to rise as buyer interest bounces back
The Royal Institute of Chartered Surveyors (RICS) expects house prices will increase over the next year as buyer demand rebounds. In September the number of properties coming to the market fell for the seventh consecutive month and new buyer enquiry numbers rose last month for the rst time since February. Housing supply has been in decline for all but a couple of months out of the last 24.
Simon Rubensohn, chief economist at RICS recently commented on the return of buyers, showing the market was, “settling down following the significant headwinds encountered through the spring and summer.
“Buyers do appear to be returning, albeit it relatively slowly, but the big issue that continues to be highlighted by respondents is the lack of fresh stock on the market. Although this is not a new story, it is a significant one, having ramifications for both prices and the level of turnover.”
More homes could be let than sold in 2017
Research from property service group Countrywide indicates that 2017 could be the first year since the 1930s when more homes are let than sold. The number of properties available to rent has been boosted by the surge among buy-to-let investors trying to purchase property before the stamp duty surcharge was introduced in April.
Research Director at Countrywide, Johnny Morris said, “A different type of two speed rental market is emerging, with falling stock and growing demand driving rental growth in many northern cities at a higher rate than those in the south.
“As some would-be buyers and sellers sit on their hands, Brexit- induced uncertainty has continued to boost the rental market.
“Overall this is yet to stoke rental inflation, but September saw record activity, with increasing numbers of lets agreed and tenants choosing to renew their contracts.”
Manchester experienced the highest rental price growth, with new let rents rising 7.1% over the last year. The cities with the largest slowdowns in growth, included London, Oxford and Cambridge, where rents only rose by a maximum of 1.8%.
An increase seen in variable mortgage rates recorded
It was expected that the reduction in the Bank of England’s base rate in August from 0.5% to 0.25% would herald a similar fall in mortgage rates. However, September has seen an increase in some variable rates, negating any ‘base rate effect’.
The latest Moneyfacts UK Mortgage Trends report has found that the average two-year tracker mortgage rate has actually increased by 0.07% from the 1.94% level seen in September, to hit a level of 2.01%. This is the same level recorded in July, prior to the rate reduction.
Some lenders may have employed a smoke-and-mirrors approach, as they actually pre-empted the rate cut by raising their variable rates in the weeks leading up to the reduction, thereby still complying with the Bank of England’s implicit instructions that any reduction in their base rate should be reflected by lenders.
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Please note: Our monthly property market review is intended to provide background to recent developments in the residential property market as well as to give an indication of how some key issues could impact in the future. We are not responsible or authorised to provide advice on investment decisions concerning property, only for the provision of mortgage advice.