Rightmove has reported a seasonal 1.1% (-£3,120) dip in the price of property coming to market this month.
However, it is the lowest December fall since 2006. It pushies the annual increase up to almost £20,000 (7.4%), and Rightmove says it is a strong indicator that upwards price pressure will continue in 2016.
Miles Shipside, Rightmove director, said: “Whilst a fall is the norm at this time of year, this is December’s best post-financial-crash performance, signalling another round of price rises in 2016. Despite the shortage of suitable stock in many parts of the market, demand for housing is on the up. Although the average price of property coming to market is already up by a hefty 7.4% compared to a year ago, Rightmove forecasts that prices will reach and breach new records next year.”
Jeremy Duncombe, director of Legal & General Mortgage Club, said: “November and December are months that typically see less demand in the market, resulting in lower house prices compared to other months. This nominal decrease in house prices from last month compared to the more severe drops we’ve seen in previous years is indicative of the scale of undersupply in today’s market. The housing crisis remains an ever burning issue in the UK, and is arguably one of the most critical problems currently facing the country.
“In order to address this issue, the government must act to stimulate housebuilding whilst also encouraging and incentivizing existing homeowners to rightsize if they wish to do so. There are a significant number of families who are living in properties that fail to meet their needs, and introducing measures which help people to rightsize will promote a more fluid market. This will also encourage more efficient use of current housing stock, which will in turn, go a long way towards closing the gap between supply and demand and help in tackling the prevailing housing crisis.”
Rightmove’s 2016 forecast is for new seller asking prices to rise by 6%. In spite of increasingly stretched affordability and rising taxation of the buy-to-let sector, there remains a stark imbalance of demand in excess of suitable supply, it argues. Rightmove analysis of email enquiries sent by potential buyers to estate agents since the start of October this year shows a jump of 37% compared to the same period in 2014. In contrast to this surge in demand, the number of properties coming to market has fallen by 5% over the same period.
Shipside said: “Whilst initiatives are in place to encourage developers to build more new homes to supplement the supply of existing ones coming to market, the lead-times are long and developers face capacity constraints. In the meantime strong demand is being further fuelled by the additional momentum and aspiration for home-ownership that schemes such as Help to Buy create. We therefore predict that the average asking price will be another £17,000 higher by the end of 2016.”
Rightmove predicts that Outer London prices will rise by circa 6% in 2016, so looking further north and west may seem increasingly attractive. Analysis of Rightmove data by Dr Alasdair Rae, of the University of Sheffield, suggests that we may see an exodus of highly-skilled workers leaving the capital for more affordable yet vibrant cities such as Leeds, Edinburgh, Cardiff and Manchester. This ripple effect won’t reach all towns and cities and continued stagnation or price falls are likely in less sought-after areas in the north and west of the country, especially if buy-to- let investor activity tails off. As choosier buyers demand easier access to amenities to satisfy convenience and lifestyle demands, expect to see increased price divergence between the more buoyant large urban markets and smaller urban areas that can’t offer the same range of facilities, the firm said.
Dr Rae predicts: “2016 may be the year when many young urban professionals finally give up on the London market and consider long-term career moves to the UK’s large, buoyant city-regions, such as Manchester, Leeds, Cardiff and Edinburgh. They are already very popular and pricey because of what they offer, but may seem cheap to London émigrés priced out of the capital.”
Making the most of April 2016 stamp-duty changes:
Rightmove claims there are some interesting and imminent dilemmas for several different sectors of the market following the Government’s recent Autumn statement about a 3% surcharge on buy-to-let and second home purchases. Some would-be buyers or sellers may want to move more quickly while others may be better advised to delay their transaction until after the stamp duty changes.
Shipside advises: “Those looking to expand their property portfolios will be trying hard to find suitable properties to buy and then complete the purchase before the April deadline. Those selling for the first time are likely owners of properties suitable for renting out, so they may be best advised to take advantage of any surge in investor activity and market as soon as possible. Given that the legal process could take six weeks or so once a buyer is found, they only have between now and the middle of February to take advantage of this artificially induced boost to buyer demand.”
Financially-stretched landlords may also consider early action and look to sell now. While rents are forecast to rise in popular locations to improve their returns, some of the hoped-for increase in capital values may be dented in this sector once the stamp duty changes have gone through.
Shipside explained: “Highly-geared landlords who are worried about the upcoming changes to mortgage interest tax relief should consider whether this is an opportune time to exit the market. Again they need to act quickly as buy-to- let investors looking to purchase will want to complete before the April deadline.”
He added that first-time buyers on the other hand may feel the increase in tax levied against buy-to-let investors in this sector will help them to secure a better deal if they delay agreeing to buy until it is too late to complete before the April deadline.
Shipside said: “If a buy-to-let investor wants to buy the same property as a first-time buyer, their purchase costs are going to be 3% higher if they do so post-April. That may mean their returns will not stack up to make it attractive, and they will potentially be at a disadvantage compared to would-be owner-occupiers looking to get onto the property ladder. Prices may therefore have a period in the relative doldrums in this lower-priced sector, until the dust has settled. However, demand among fellow first-time buyers remains strong so waiting for prices to fall could be just wishful thinking. A lot depends on the dynamics of your local property market so doing your local research is very important as always.”