Connells Survey and Valuation has reported that there was another drop in property valuations during October.
Last month 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%, an improvement from a slightly steeper fall of 12% over the 12 months to September 2014.
“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,” said John Bagshaw, corporate services director of Connells Survey & Valuation.
“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.
“We may see a further seasonal lull in the housing market as we approach the holiday season. And looking further ahead, the general election in May 2015 is also likely to bring increased caution with the prospect of policy uncertainty.”
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.
Bagshaw said: “Buy-to-let was the strongest performing sector in a clear indication that lenders are focusing on low risk investors as a result of increased regulation. Policies like loan to income caps have introduced stricter lending rules but crucially do not apply to the buy-to-let sector. There are now an array of competitive rates out there, especially on low LTVs.”
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.
“The impact of Stamp Duty on buyers is also not to be ignored. Though it has been a permanent feature of the housing market for a while, the prospect of a hefty tax bill is still daunting to many, especially as house prices continue to rise and push properties into higher tax brackets.”
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%.
Bagshaw added: “Though lenders are offering competitive mortgage rates, this is balanced by increased regulation in the shape of MMR and loan to income caps. These factors seem to have dampened demand for remortgaging recently. Yet over the longer term, remortgaging is still beating the rest of the market, since many households remain stretched and borrowers want to reduce their monthly payments wherever possible, taking advantage of cheaper rates.”
