21 June 2020
A brief look at what is happening in the UK property
market and what it means for the Retford and North Nottinghamshire market.
What has been happening in the property market in the
past few weeks?
As we begin to come out of the lockdown the outlook for
the housing market is still taking shape, but here I take a look at three
market indicators to watch. From buyer
sentiment to Bank of England forecasts, higher loan-to-value mortgages and first-time
buyers, here is how I think these key factors will influence the market:
Mover Decisions
Some 60% of prospective home movers say they intend to
continue with their plans despite the impact of Covid-19, according to a recent
Zoopla survey. Some 22% said they were not affected by the pandemic, while the
remainder said they had felt the impact, but wanted to continue with their next
move regardless.
The extent to which buyers and sellers continue with
their plans will also determine how many of the 373,000 sales stalled due to
lockdown will go on to complete, and this will affect the level of total
transactions this year.
After weeks of the market being in suspension, buyer
demand in England after the housing market opened on 13 May rose by 88% in a
week, suggesting that there will be a flurry of activity for some time. This is
according to the property industry reports.
It is possible that post-lockdown demand is also spurring
more activity among those who had no previous plans to move as people have spent
so much time in their homes over the last two months - prompting a change in
view in how and where they want to live. In effect, it could have created a
one-off Covid-19 bounce. I’m sure many people will be saying ‘’We need a bigger
house.’’
The Economic Outlook
The current projections from the Bank of England signal
that UK unemployment will rise sharply and that the economic output for the UK
will fall significantly. But still remains unknown if this gloomy outlook will
become reality. Remember what the Bank of England told us about Brexit.
The housing market is certainly better placed to weather
an economic downturn than after the financial crisis however, given the
stricter mortgage lending criteria and stress-tests that have been in place for
the last ten years. These have helped build an equity cushion in the housing
market right across the country.
Availability of Mortgage Finance
Interest rates are still at record lows, (Just have a
think about that). Which means borrowing money is cheap now, so it may be a
good time to buy, as you will pay a reduced cost for the pleasure of borrowing
money to buy that investment. It can be very hard to accurately predict what interest
rates or property values will do, so these shouldn’t be deciding factors – but
they are worth considering.
Alongside stricter lending criteria, a wider range of
higher LTV loans started coming back to the market in recent years, allowing a
greater number of first-time buyers (who can pass affordability tests but who
do not have access to large deposits) to climb onto the property market.
However, as lockdown started, and the mortgage lenders
turned their attention to dealing with the welcome move to mortgage holidays,
new lending levels started to decline, and the range of mortgages on offer
contracted.
As the market enters the next phase, first-time buyers
who are keen to progress will still need access to higher LTV loans or they
will have to step back from the market while save more money for a deposit.
Alternatively, they may look to take advantage of the Help to Buy scheme on new
homes.
These factors together will help determine the future
path of the housing market in the months to come
The average time between a house sale agreed and
exchange/completion of contracts on a sale (i.e. the keys and monies get
sorted) is 8 to 12 weeks, which means buying today would mean you wouldn’t be
getting your hands on the property until late August or September at the
earliest. I know there are many inside the property industry that are already
working on a campaign to significantly reduce the waiting time from sale to
completion. I’m sure people are tired of the old process of waiting for the
various agencies to do their bit and adding to the time delay. I faster system
will be coming soon I’m sure.
The property portal Rightmove stated that people going to
their website initially dropped by 40% at the start of lockdown, but now has
recovered with a near doubling of people searching for properties with gardens
(for both sales and renting).
I know there are a few doom mongers in the National Press
spouting about a massive crash in the UK property market. There is a natural
tendency for newspapers to latch onto the worst-case scenario in any economic
forecast. Who can forget the country received similar projections in the
lead-up to the 2016 Brexit vote with HMRC itself stating that UK house values
would drop by at least 10% in the first 12 months should the UK vote for Brexit
and 20% in two years!
With the rollercoaster of the stock market in recent
months, investing your money into good old-fashioned bricks and mortar has
started to seem a good place again.
Buying a property for investment means you have a
tangible asset, something you can touch and feel (and understand). The returns
from investing in property come from both capital appreciation and income from
the rent, and yes whilst property values can go up as well as down, successful
buy to let landlords are inclined to take a long-term view on their property
investments.
Isn’t it funny the newspapers aren’t latching on to some
reports to say the property market might go in the other direction? Remember –
bad news sells newspapers!
So, what will happen to the Retford and North
Nottinghamshire (and UK) property market?
To be honest – nobody knows. What I do know is the Swine
Flu in 2009 caused some volatility in the UK property market, but the market
stabilised within months. Even in disaster scenarios such as the current one,
property remains comparatively stable and will continue to be one of the best
places to invest in.
Yes, we could see unemployment rise in the next 6 months
(yet the Furlough Scheme has been extended until the autumn) and historically,
it has been proved house price falls are not caused by high unemployment; yes
GDP will drop drastically because of lockdown yet it could bounce back like it
has in China; yes, the number of property transactions might drop, yet that
will only really effect the pockets of removal people, solicitors and estate agents
and the Chancellor of the Exchequer in lost stamp duty receipts; yes there is
£82bn worth of property sales on ice during this lockdown (some of which might
not complete) ... it’s all ifs, buts and maybes.
We will get over this current predicament, humanity
shifts to become more productive - it’s the way it’s always been
The national debt at the end of the Napoleonic Wars of
1815 in today’s money was an eye watering £4.42 trillion and even with the eye
watering borrowing to fund Covid-19, it stands at £1,821.3 trillion – we have
been here before and we will come out stronger.
The Bank of England failed in 1825, yet we recovered
stronger, the Great Depression of the 1930’s cut the Stock Market by 90%, yet
we recovered, WW2 took national debt to 200% of GDP – yet we recovered, the oil
crisis quadrupled oil prices in the 1970’s – and we came back …. the list goes
on with hyper-inflation in the 1970s of 25%, mass unemployment in the 1980’s,
Black Monday in 1987, Dot-com bubble in 2001 and credit crunch in 2008/9.
With every economic crisis, the long-term effects of them
make people look at their decision making differently
The simple fact is for decades, demand for homes has
outstripped supply – hence why property values have remained so strong. People
are living longer (71.1 years in 1960 and 81.1 years nowadays), the mass exodus
of EU nationals has not taken place since Brexit and the birth rate has
increased by 9.1% since the Millennium, which means since 2000, the country has
needed at least 240,000 households more per year to satisfy the demand. On
average, we have only built 150,000 households a year, meaning we have a
shortfall of 90,000 households each year for 20 years … a true shortfall of
1.8m households ... and until we start building anything over that 240,000
requirement … demand will always outstrip supply – and we all know what happens
to prices when that happens!
OK so what about the Retford Area?
This is the current situation in North Nottinghamshire. I
will mention Retford, Worksop and Harworth and Bircotes areas as examples.
First looking at actual sold prices for properties and then looking at current
asking prices.
In my area of North Nottinghamshire (my area, might be
interpreted differently by others so I am talking here about postcode areas
DN22, S80, S81, parts of NG22, DN10, and DN11) in 2019 there were 2,614
properties sold. Most of these sales, 46% were in the Worksop area. The Retford
area accounted for 24%, Harworth & Bircotes 11% and the remaining villages
together made up 19%.
House Prices in Retford (actually sold)
Properties in Retford had an overall average price of
£194,688 over the last year. The
majority of sales in Retford during the last year were detached properties, selling
for an average price of £283,626. Semi-detached properties sold for an average
of £145,085, with terraced properties fetching £115,166.
House Prices in Worksop (actually sold)
Properties in Worksop had an overall average price of
£173,658 over the last year. The
majority of sales in Worksop during the last year were semi-detached
properties, selling for an average price of £141,989. Detached properties sold
for an average of £250,537, with terraced properties fetching £100,532.
House Prices in Harworth and Bircotes (actually sold)
Properties in Harworth and
Bircotes had an overall average price of £132,895 over the last year. The majority of sales in Harworth and
Bircotes during the last year were semi-detached properties, selling for an
average price of £122,434. Detached properties sold for an average of £202,999,
with terraced properties fetching £102,596.
What's on offer right now?
As of today 21 June 2020 we have 785 properties for sale
across the area with an average asking price of £266,637 and 252 of those are
currently under offer.
Please have a look at what’s currently on offer in the
Retford, Worksop and Harworth and Bircotes areas.
If you need any help in finding a property or if you want
a second/third opinion on a potential purchase, call me or send an email to:
geraldbowers@thegoodea.co.uk
☎01777 237310 ☎ Messages to ☎07981 744003 ☎
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