Housing market set to overtake 2007 peak
Activity in the housing market has been greater this year than in 2007, with the first six months of 2013 seeing 1% more valuations than in the same period six years ago.
Figures were bolstered by a particularly strong month in June. The total number of residential valuations conducted in June rose by 54% from a year ago, marking the ninth month in a row of year-on-year growth. On a monthly basis, valuations activity has picked up by 36% since May.
John Bagshaw, corporate services director of Connells Survey & Valuation, said: “It’s been six years since there was such a heady atmosphere in the housing market. Naturally, we shouldn’t get carried away.
“It might be strawberry season once more, but no-one’s cracking out the champagne until we’ve negotiated some awkward economic topics.
“The credit crunch is still lurking in the background, with Europe and now even China serving as constant reminders of the danger of over-optimism.
“But closer to home things are stabilising, and this is feeding a resurgence in the housing market. Activity has grown rapidly during the first half of the year, with June figures looking particularly positive. After nine months of year on year growth, the market is going from strength to strength.”
Much of the revival in activity is due to an ongoing surge in remortgaging. The number of remortgaging valuations in June was 94% higher than in the same month last year, while on a monthly basis remortgaging in June saw 54% growth.
Buy-to-let activity grew at the second fastest annual rate, with valuations for landlords in June up 59% compared to a year ago. On a monthly basis, buy-to-let activity has grown by 32% compared to May.
Bagshaw continues: “A year on since the announcement of Funding for Lending, some homeowners have seen affordability boom as interest rates for some borrowers have tumbled.
“Since the start of the year the expanding range of products on the market has seen a strong uptake from those looking for lower monthly rates.
“This surge has been led by lower LTV lending, as many borrowers with plenty of equity have chosen to make the most of the chance for cheaper monthly payments.
“In particular fixed rate deals are seen as an increasingly popular way to avoid any chance of higher rates in the future.”
Alongside rapid increases in other sub-sectors, first-time buyers have also seen a strong improvement.
In June, a 27% monthly increase leaves the number of valuations on behalf of first-time buyers 44% higher than in June last year.
As a proportion first time buyers now make up 31% of the valuations market compared to 33% in June 2007.
However in absolute terms there was a slight increase (1%) in the volume of valuations by first-time buyers compared to June 2007.
Bagshaw said: “Affordability is one thing, but accessibility is another. Lower mortgage rates for established homeowners have worked wonders for thousands of stretched households. But it has taken longer for first-time buyers to benefit from Funding for Lending and healthier lenders.
“More recently progress for first-time buyers has picked up and progress has steadied. Now, with more valuations for new buyers this June than in the same month in 2007, it looks like progress towards something like pre-crisis normality could finally be back on track.”
Home movers saw a 40% annual increase in valuations activity, after a 34% pick-up from May. As a proportion this leaves those valuations undertaken for people moving home at 32% of all activity, down from 35% of all activity in June last year and 37% in 2007.
Bagshaw said: “The second step and beyond are becoming more affordable for some people. But – if and when the housing market can support a return of first-time buyers – moving up the chain could rapidly become the new bottleneck.
“Even if owner-occupancy starts to pick up again, the fundamental ratio of earnings to house prices will keep a lid on aspirations for a bigger garden or a spare bedroom.
“House prices may be rising as a result of activity overall, but wages are still lagging behind the economic climate rather than racing ahead, and this is likely to affect the housing food chain for many more years to come.”