Stagnating Instructions Underpin Stronger Price Trend
It’s been an interesting November for the stocks and sales markets, we’ve seen some rises and falls in the past couple of months. Let’s take a look at what happened in November:
1. The market tightens as we see a fall in stock levels and an increase in sales levels
2. The expectations of house prices have become very robust
3. We’re seeing signs of a growing sturdiness beyond the London Market
The November Residential Market Survey supplied by RICS highlights the recent trends in the sales market. The main price balance which has been recorded for England and Wales reached a high of +58 – This is the highest reading we’ve seen in over 11 years, however, the London price balance still maintains its top position with a significant gap at +99. We are now seeing 8/10 regions in England and Wales experiencing readings of +30 and above.
It’s good to see that prices are rising on the back of the more difficult market conditions. Indeed, It’s great to see that the headline ratio of sales to stock had rose to 34.5% throughout November , which is the second consecutive month that it’s remained above its long term average of 32%, as well as its highest reading since back in October 2007. Not only are we seeing stock levels plummet to historically low levels, but we are seeing a significant increase in the sales levels – This is also reflected by the new instructions given on the survey and a new series of buyer enquiries.
There are a number of factors that are believed to have made a contribution to the significant increase in the sales climate. This is said to have occurred due to the influence of the lending and help to buy schemes, which have led to an improvement on credit conditions. This is not only evident in the decrease of benchmarks for mortgages, but has also been shown in the average loan to value ratios, which have been measured by the RICS Survey.
The expectations of house process over the short, medium and long term periods have seen a large rise over the last year or so. It is noted that over 3 months, the price expectations balanced has seen an increase of up to +59 throughout November, which again, month on month, is the highest we’ve seen in a long time. It is expected that over the next 12 months, we are likely to see an increase of 3% in prices, and 5% over the next 5 years prices.
Due to the timing of the announcement around the decision to terminate the household element of the funding for lending scheme, the survey was only partially covered for this. It is unsure as to whether this decision will have an impact on pricing, as activity seems to be remaining the same at present without any factual evidence, as this is yet to be seen.
With a drastic increase in the momentum of the housing markets positive shift up a gear in the recent months, the rental market has taken a slight hit, seeing a decrease in activity. This seems to be an impact from the government’s announcement to rid of the second arm of help to buy. There has definitely been limited change in the rental and landlord demands; however, London is now beginning to show a decrease in demand for both.
Surveyors are still expecting to see rentals increase to about 2% over the next 12 months, and double that over the next five years. The survey’s regional data has indicated that the expectations for rental properties are more evenly spread than those for house prices – London is much closer to the average.
David Moor Chartered Surveyors
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