Blogs

Are home-grown buyers regaining the confidence to enter the property market?

Alex Johnson

ae862bd1d6d8e30d4dbcfde3a7403a02bc1fadbe 300x200 Are home grown buyers regaining the confidence to enter the property market?Confidence is a difficult thing to measure accurately, writes James Scott-Lee from Anscombe & Ringland but the actions of people transacting in the property market lead us to believe that it is improving when we look at the statistics for these actions.

For many months, year on year, rent increases have been keeping up with inflation, if not exceeding it. These increases have edged to just below inflation – despite this being the busiest time of year when demand is at its highest. The percentage of tenants renewing their tenancies has also edged, and these people have not rented elsewhere but got on to the housing ladder.

For many, this has been possible by the Government making funds available to lenders at very competitive rates provided their net book has increased in the following period. If the mortgage book does not so increase, the penalty rate is far from penal when compared with the rates of interest private savers have been getting. In fact, it is said that this initiative has driven down private investor rates of interest. Clearly, not an initiative by Government to help savers but one that has made it easier for those requiring a mortgage. It has resulted in lenders competing for borrowers’ custom, something we have not seen since before the crash. In doing so, the deposit requirements have been eased enabling more people with smaller deposits to buy. The Government has compounded this with guarantees for deposits on new homes, which it plans to extend to second-hand homes up to purchase prices of some £650k.

Meanwhile, the supply of properties of a type that the average first-time and second-time buyer seeks is in relative short supply. This is because first-time sellers and second-time sellers have had their incomes squeezed by withdrawal of benefits and an increased burden of tax. These families have a home; they do not need a larger mortgage so they are sitting tight. The result: A growing demand not being met by the supply.

So, from having lots of instructions and few buyers who can buy, estate agents now have lots of buyers but a register of properties for sale that is shrinking, as it is not being replenished to meet the new demand.

As more people have less choice they become more determined to buy, so putting upward pressure on prices. As prices are seen to rise, so more people seek to buy to benefit from the capital appreciation, resulting in even more pressure on prices as reported.

As we come out of a recession, all of the above, save for Government help, can be expected and indeed welcomed. A small dose of inflation in property prices will get the cogs turning again in the property industry and all those industries that feed off it. The danger is runaway property price inflation, but already the professions are considering how the Government might put controls in place on lending to ensure a gentle rise in values over the years, rather than the boom and bust we have suffered in the forty years I have been in the business.

I am not holding my breath that this will be achieved…

This is a guest post by James Scott-Lee from Anscombe & Ringland which is a part of the Chancellors Group of estate agents.


Property search
Browse by area

Latest from Independent journalists on Twitter