The inevitable slowdown and the anticipated rebound
According to the ONS, average house prices in the UK increased by 8.7% in the year to June 2016, up from 8.5% in the year to May 2016. However, despite this strong growth seen since the end of 2013, the average asking prices for properties in England and Wales fell by more than £3,600 in August.
This could be due to the increased activity in the market in the first half of 2016, when landlords rushed to complete deals to avoid the hike in stamp duty or simply because of Brexit panic. However, in my opinion, it is down to the seasonal summer slowdown that the market experiences year after year. After all, the vast majority of Brits take annual leave in August, highlighting how summer is notoriously a slow time for the mortgage market as many prospective buyers take a break from home hunting.
However, those that do come to the market at this quiet time tend to price more aggressively and this typically puts homebuyers in a stronger position to negotiate a better deal. As for interest rates, they have never been cheaper and I expect a more ‘normal’ market to emerge in mid-September.
It can be argued that due to the Euros and the Olympics, moral has been high and is encouraging many to maintain a ‘glass half full’ mentality with some deciding to move house or take their first step onto the property ladder.
In fact, our new homes division has already seen a significant spike in enquiries which suggests that confidence in the property market is returning rapidly.
Although political developments may cause some ongoing disturbance to the usual negotiation process, lending rates and the unwavering demand from buyers and general demand caused by under supply will help stem any significant decline in mortgage activity.
In other words, these underlying fundamentals suggest that buyer motivation and applicant enquiries will remain strong.
We should get a clearer view of the state of the market by the autumn but it is clear that bricks and mortar is proving to be a safe post-Brexit investment for many. Lenders must keep mortgage deals attractive and readily available and, as an industry, we should capitalise on this opportunity by ensuring the growing interest and confidence from buyers is turned into action. It is business as usual for the majority of the market so it is time we remained cautiously optimistic, as the demand for homeownership is likely to overcome any current or future uncertainties in the market.