The property industry has reacted positively to the latest Land Registry figures.
The latest Land Registry figures were released this week and they show that despite a high level of uncertainly around the EU referendum and the introduction of higher stamp duty levels for buy-to-let investors, residential property prices remained remarkably robust in June.
The Land Registry HPI reveals that house prices remained firm in June despite a sharp fall in property sales in the second quarter of the year following a rush to buy properties before higher stamp duty rates came into at the start of April for those acquiring a second home or buy-to-let investment.
Property prices across the UK rose by an average of 1% in June taking the typical home to £214,000 – £17,000 higher than in 2015 and £2,100 higher than the previous month this year.
The housing industry has unsurprisingly reacted positively to the latest monthly house price index, which is “a far cry from the house price collapse forecast in the run up to the EU referendum”, according to Paul Smith, CEO of haart estate agents, who was pleased to see that property prices kept on rising in June, albeit at a slighter slower pace of growth compared with an inflation-busting 8.7% increase in June last year.
“There has certainly been some uncertainty in the market since the referendum, but buyers and sellers are now starting to feel more confident,” said Smith.
“Many first-time buyers and second steppers will be attracted by the very favourable mortgage rates now on offer since the Bank of England reduced its Base Rate, and we will soon see a return to strong trend of growth before uncertainty shook the market,” he added.
London will recover
It is interesting to see the increase in growth in UK provinces such as the East of England, which has replaced London as the region with the highest growth, as the capital feels the brunt of the force of the stamp duty increase in April, with Smith explaining that landlords and other buyers are starting to filter out from the capital to other regions where they are likely to see a better return on their investment.
Despite the recent slowdown in the capital’s housing market, Andrew Bridges, Managing Director of Stirling Ackroyd, believes that demand is set to pick up, supported in part by a rise in overseas buyers seeking to take advantage of a favourable currency exchange rate, with the UK pound currently at its lowest level against the US dollar for more than 30 years.
“Amid all the doubt and predictions in the last couple of months, London’s property market is still on a long-term upward trend, and prices are 12.6% higher than at the same time last year,” he said. “We may see that the London market takes a breath over the next few months, but make no mistake the trajectory is very much upwards unless tens of thousands more new homes can be built each year.”
Bridges continued: “One thing is clear from the figures for June – despite a month of swelling uncertainty for the entire property market – hefty house prices are here to stay.”
Room for growth
The latest increase in house prices is good news for many of those who own their home already, but Richard Connolly, Chief Executive Officer at Rentplus, points out that for the many people who are saving to get on the property ladder it is another indicator of a lack of affordability and the continuation of the housing crisis.
“The ability to put up a deposit remains the biggest barrier to home ownership and, with real wages in the UK falling and low interest rates working against savvy savers, first-time buyers will find it increasingly difficult over the coming years to make the savings necessary to own their own home,” he noted.
Connolly is hoping that the new Prime Minister’s pledge to tackle the housing crisis by building 250,000 homes per year is honoured, but insists that a “one size fits all approach to the types of housing available won’t work”.
He strongly believes that the government needs to do more to accommodate innovative new housing models which increase access to home ownership and at the same time offer people security of tenure.
He commented: “The strength of the house price data will increase the confidence of the residential construction industry in this post-Brexit period, but more needs to be done to escalate the scale of delivery to meet the challenges of affordability and a growing population.
“New market entrants which bring private institutional investment to the affordable housing sector now ought to be considered as a key part of the solution to the housing crisis, boosting the number of homes available for aspirant home owners.”
Supply-demand imbalance
Given that the number of homes currently being built remains significantly below the estimated 300,000 new homes a
year needed just to meet demand for property in this country, according to a recent report from the House of Lords Economic Affairs Committee, it is unlikely that existing housing needs will be satisfied any time soon. In fact, the situation could soon worsen if, as widely expected, significantly more people seek to take advantage of record-low borrowing rates, which would drive home prices even higher.
Appetite for housing continues to outweigh supply, following a modest 1.8% increase in new-build housing output for the second quarter of 2016, and only by tackling this will buyers’ see a respite in the cost of housing,” said Andy Knee, Chief Executive of LMS.
He continued: “Looking ahead, the recent base rate cut to 0.25% will be a major factor in the second half performance of the housing market in 2016, as well as the wider economy. Savers might be forgiven for thinking the outlook can hardly get much worse, but it is likely to mean a prolonged season of discounted mortgage pricing which will provide extra incentive to aspiring homebuyers and people who want to remortgage.”