The housing market has now cooled following a pick-up in valuations activity in September. October saw the total number of valuations fall by 20% compared to the previous month.
However, on an annual basis, housing market activity decreased by 10%, which is an improvement from a slightly steeper fall of 12% over the twelve months to September 2014.
John Bagshaw (pictured), corporate services director of Connells Survey & Valuation, said: “The loudest signal here is one of stability. While the housing market is now less animated than in September, the slowdown is broadly in line with seasonal expectations and is not an alarm bell. On average, we have seen a 16% drop from September to October every year since 2010.
“However, beyond seasonal factors, there are other things contributing to this slowdown. The introduction of stricter policies designed to restrain uncontrolled growth and protect against a return to the property bubble of 2008 have tempered the housing market. For instance the recent loan to income cap which came into force in October seems to have had a considerable impact.”
The Bank of England introduced new rules from 1 October which mean that no more than 15% of mortgages issued by a lender should exceed a loan-to-income ratio of 4.5.
The Treasury also adjusted the Help to Buy scheme in line with these proposals, so no Help to Buy loans with a loan-to-income ratio exceeding 4.5 can be accepted.
Buy-to-let performed the strongest with a noticeably small annual dip of 7% compared to the rest of the market. Even on a month-on-month basis this section of the housing market did better than the others with the smallest drop of 17% since September. The loan to income cap does not affect the buy-to-let sector.
First time buyer valuations made up almost a third of total activity in October (30%). However, the number of valuations for first time buyers was still down 18% compared to the previous month, and 11% lower on an annual basis. Other owner occupiers moving home saw a month-on-month dip of 21%, as well as the biggest annual drop of 16% compared to October 2013.
“While Help to Buy has supported many first time buyers to get on the property ladder, other new policies have introduced fresh limits to promote responsible lending,” said Bagshaw, “These new caps seem to have affected first time buyers and home movers the most.”
Remortgaging valuations were down the most on a month-on-month basis, with a decrease of 23% compared to September. However, remortgaging continued to do well on an annual basis, with one of the smallest annual dips of 9%.
