Name: Howard Archer
Company: IHS Global Insight
The June Rightmove housing market survey reinforces our suspicion that house prices will struggle to make significant gains over the coming months.
Housing market activity has been markedly softer so far in 2010, compared to the latter months of 2009; the economic fundamentals, such as high unemployment, still falling full-time employment and low earnings growth, are still far from robust for the housing market. Credit conditions are still tight, and house price/earnings ratios have moved back up as a result of the significant overall increase in house prices from their early 2009 lows. In addition, households face a substantial, extended fiscal squeeze.
Meanwhile, more properties are coming onto the market moving the supply/demand balance more in favour of buyers. This is particularly relevant as a shortage of properties has been a key factor in the recovery in house prices from their early-2009 lows.
Significantly, Rightmove reported that there was a 22% increase in June in the number of sellers coming on to the market, with unsold stock per estate agent reaching a 20-month high of 74 in May. However, some support for house activity and prices will come from the two-year Stamp Duty holiday for first-time buyers on all properties costing up to £250,000.
On balance, house prices are likely to be erratic over the coming months and at best will make very modest gains over the rest of the year. Indeed, we would not be surprised if they were flat across the rest of 2010.
Name: David Whittaker
Company: Mortgages for Business
Welcome though this news is, the flattening out of house price growth was driven by other more pressing economic factors. Borrowers are unsure about not only salary increases this year, but whether the effect of cuts in government spending will result in fewer government contracts, or for those directly employed in government departments, whether their own jobs are safe.
Disposable income will contract either through higher taxation or loss of benefits; mortgage borrowers will hold back unless there are very tempting mortgage offers.
The hike in Capital Gains Tax seems high against the very recent past, but is not much above historic norms. Professional property investors take a long-term view and generally avoid the trap of selling at a discount in a soft market simply to avoid tax, when in the longer-term, any tax payment is offset by a higher sale price. Now is not the time to panic.
Improved product offerings by existing buy-to-let lenders and two new lenders entering the market is restoring confidence to this sector. However, all these lenders will need to absorb the continuing re-alignment of UK bank balance sheets and the wholesale withdrawal of Irish banks.
Getting the new lenders fully engaged before those departing create a bout of nervousness will be finely judged timing.
This all points to an early summer holiday for the property market, with a more solid pick-up in activity come mid-September. The potential winners will be those picking up properties that have to be sold before the autumn.
Name: Miles Shipside
Company: Rightmove
New sellers’ asking prices give an early indicator of the mood and future direction of the housing market. While sellers have increased their price aspirations for six months in a row, the pace is now slackening, with a rise of just 0.3% this month.
The suspension of HIPs means we are now seeing more sellers and a slowdown in the number of buyers as the government austerity measures become reality. New listings are up 56% compared to June 2009. This new supply surge will tail off to a degree, but higher seller numbers and increased competition are factors that those who are serious about selling will have to consider when setting their prices.
Having seen a 7.4% increase in the first six months of 2010, new seller prices are likely to fall during the second half of 2010 to give a static price for the year. The uncertainty and difficulty caused by the recession and the barrier to selling caused by the cost of a HIP had helped to maintain a degree of market equilibrium by keeping the number of sellers the same as the muted buyers. This month, Rightmove has recorded a 22% increase in the weekly run-rate of new sellers coming to market, up from 27,235 in May to 33,149.
Average unsold stock per estate agency has increased for the fourth consecutive month. Stock levels are failing to turn downwards as they normally do in spring, and are now the highest since October 2008. Estate agents will get more selective about the price that they are willing to market at and the commitment of sellers to do what it takes to achieve a sale.
