Rightmove’s December House Price Index has revealed that the price of property coming to market saw its usual seasonal fall this month, down by 2.1% (-£6,511).
The firm said that while this was not unexpected, being exactly in line with the average over the last six years, what was surprising is the strength of buyer activity, with sales agreed up by 5.2% on November last year in spite of the backdrop of Brexit uncertainty.
Miles Shipside, Rightmove director, said: “For the housing market the uncertain outlook has meant a head and heart tug of war between ‘stay put’ and ‘carry on moving’. After a pause the mass-market seems to have opted firmly for the latter in most parts of the country.
“As we come to the end of the year these figures showing high levels of sales agreed and dwindling numbers of homes for sale give a far greater level of reassurance about the outlook for 2017 than was previously available.”
While the market has built up some momentum which Rightmove expects to continue into next year, the uncertainty plus increasingly stretched affordability will continue to weigh on house prices, so its forecast for 2017 is for modest price growth of 2% nationally. Rightmove forecasts Inner London to remain weak and prices to fall by a further 5% in 2017, as its price bubble continues to deflate, whilst Outer London is predicted to record a similar increase to this year of circa 3%.
Shipside said: “The price of property coming to market in 2016 is currently up by 3.4% compared to a year ago, so while a forecast rise of 2% in 2017 is a lessening of the pace, it would still be the seventh consecutive year of rising property prices. As well as prices moving out of reach for some buyers, the sword of Brexit uncertainty hangs over the market, an unknown factor that may – or may not – have damaging consequences for the economy and confidence.
“There was a bout of jitters with the unexpected referendum result, albeit now seemingly short-lived, but more may arrive after Article 50 is invoked. For the time being any nervousness is being over-ridden by high demand for the short supply of suitable homes for sale in the lower and middle market in many parts of the country.”
HRightmove website visits are up 9% from 101 million in November 2015 to 110 million last month. This activity has fed through into a considerable rise in sales agreed, up by 5.2% nationally when compared with the same month last year. All regions except London are selling at higher levels than a year ago, with three regions having increases of over 10%. They are Yorkshire and the Humber at +15.4%, the North East at +13.3% and Wales at +11%. While London is down by 7%, it is a considerable improvement on the 18% decline measured in October.
Shipside said: “Given the immediate post-referendum state of shock in July, these sales agreed figures are quite remarkable, with nine out of 10 regions ahead on last year. While not unexpected in the north of the country, it also includes all southern regions except London. Demand for mass-market housing remains undimmed, though buyers’ budgets are restricted and agents report that over-priced property is being shunned. Cheap and available mortgage money is a big factor in driving demand, and continuing market buoyancy next year will depend on banks remaining willing and able to lend.”
Supply remains tight compared to a year ago, in terms of both new-to-the-market listings and available stock for sale. Fresh supply is little changed, being only 2% above last year, failing to keep pace with and replace the 5.2% increase in sales agreed. Consequently, the number of available properties for sale per estate agency branch is down by around 5%, dropping from an average of 59 to 56.
Shipside added: “Demand from first-time buyers looking to buy rather than rent will continue, fuelled by monthly mortgage repayments being cheaper than rent, and rents forecast to rise further. Second-steppers’ family needs for more space and the right school catchment areas will help that sector, especially as their ability to trade up is assisted by lenders keen to attract their quality business. The upper end of the market, where transactions are often more discretionary, will still hang back as the cost of trading up is often a big jump for less perceived gain than in cheaper sectors.
“What is certain is that we will not have a skewed first quarter like this year’s, which was driven by April’s buy-to-let stamp duty deadline, and that may result in transaction numbers in 2017 being slightly down on 2016.”
Jeremy Duncombe, director of Legal & General Mortgage Club, added: “November’s figures are following the trend set by the previous month by showing a slight decrease in house price inflation.
“The problem – as ever – is that wage inflation is continually being outstripped by house price inflation. Until we realign these two fundamental elements of the market, first time buyers will continue to struggle to get on the housing ladder. With the promised Housing White Paper due at the start of the New Year, it is time for the Government to start tackling the structural problems in the housing market.”