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12th September 2016
Conditions in the housing market appear to be stabilising following a turbulent first half to the year, when market activity was first distorted by a rush of buy to let investors ahead of the new Stamp Duty regime and then hit by Brexit uncertainty. This bodes well for private housebuilders. Glenigan has recorded a sustained strengthening in planning approvals in recent months. Improved consumer sentiment should support project starts during the remainder of 2016.
Transactions spiked in March as buy to let investors added properties to their portfolio prior to the introduction of a stamp duty surcharge on buy to let and second homes. Transactions subsequently fell back in the second quarter.
In recent months the leading house price measures have sent mixed messages on house price inflation. The Halifax index recorded small 0.2% drop in prices during August with annual inflation slowing to 6.9% in August. In contrast the Nationwide tracked a 0.6% rise in prices during August; the annual rate of growth also strengthened to 5.6%, although it remains below that rate of growth reported by the Halifax.
Estate agents responding to the August 2016 RICS Residential Market Survey report that confidence is gradually returning following a significant drop immediately after the EU referendum. The headline price indicator edged higher during August, with a net balance of +12% of respondents reporting an increase in prices (up from +5% previously).
Survey respondents now expect a moderate rises in prices and sales volumes over the next twelve months. Homeownership appears set to be the main driver for market growth. Whilst enquires from first time buyers and existing owners have softened over the last three months, demand is expected to improve over the coming months. In contrast a balance of 57% of surveyors had received fewer enquiries from buy-to-let during the preceding 3 months. Furthermore a net balance of 12% of surveyors feel landlords are more likely to decrease (rather than increase) the size of their portfolio over the next twelve months. Stamp Duty changes and scheduled cuts to mortgage interest tax relief are both seen as important factors.
The prospect of more stable conditions in the general housing market will be welcomed by housebuilders. The latest Glenigan Index shows that the value of private housing projects starting on site slipped back during the three months to August. However the number of schemes securing planning approval has continued to rise. The prospect of strengthening purchaser confidence should encourage housebuilders to start development work on approved sites.
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