As November nears an end, it’s easy to assume that property buyers and sellers down tools, pick-out their favourite reindeer jumper, start planning some witty repartee for the office Christmas party and that they generally are doing anything other than thinking about buying or selling a house. Buyers, as I’ve been at pains to point out in the last couple of months, actually remain quite active and the proportion of property sales in winter is actually great. Generally, however, there is a sense that winter is a bit quieter and that November will start to see things tailing-off a bit. However, it seems that November 2013 didn’t get that particular Memo. Mortgage lending has gone through the roof compared to the same time in 2012, we’ve seen a record number of sales new properties coming to the market and November has seen your average estate agent having to seriously neglect the decoration of the Christmas tree as activity levels have been at a record level. So what does all this activity mean for you if you are thinking of buying or selling a property and what is it likely to mean for house prices in your area? For the answers, read on…!
Demand for Housing Significantly Up in October 2013 vs October 2012
Mortgage Lending Up 32% in October 2013 – (http://www.theguardian.com/business/2013/nov/25/mortgage-lending-hits-10bn-pounds-october).
Mortgage lending is a great indicator of how many people are out there in the property market looking for property. So it’s hardly a surprise that we have been run off our feet in November when mortgage lending in October 2013 was up 32% on the same period last year. The government’s Help to Buy scheme has undoubtedly helped with this. That, combined with increased confidence in the housing market, has driven a huge increase in the amount of people borrowing in order to buy a new home. The number of approvals for mortgages was also up 33% when compared to the same period in the previous year.
‘Analysts’ in the news piece above noted that the number of approvals was slightly down when compared to the previous month and attributed that to prices becoming unaffordable. My view is that such analysis is absolutely speculative. Traditionally the market tails-off into winter, partly because sellers themselves don’t think that it’s a great time to sell and so the amount of properties available to buy actually goes down at this time of year. In all honesty, I’m astonished that the amount of approvals in October versus September isn’t significantly lower. The fact that it is almost at the same level is indicative of the unexpected surge that we have seen in terms of buying. As I write this, I’ve seen seven written offers coming in to our fax inbox in the past three hours as buyers try to secure a home before Christmas (yes, believe it or not, solicitors still use fax to submit offers…sadly I don’t make the rules!). There is absolutely no sign of things tailing-off at the moment.
Supply of Properties for Sale is Being Outstripped by Demand
As I wrote last month, demand this year, in winter, is outstripping supply. Why? Sellers believe that winter is a bad time to sell. Some solicitor estate agents even recommend that they wait until the spring to put their properties on the market. This leads to a lack of properties coming to the market at this time of year. However, 33% more mortgage approvals in October 2013 versus October 2012 is a clear indicator of the level of demand out there. Combine that with buyers’ desire to have a house purchase secured by the time the holidays rock-up, even if they don’t move in until next year, and you have a bit of an imbalance between supply and demand, with demand outstripping supply.
In November, for yet another month, we have seen significantly more properties selling than have signed-up to go on the market: that in spite of our very best efforts to give sellers a reason to sign-up before the end of 2013 with our Half Price Home Report/Free Rightmove Premium Winter Promo – Promo Now Finished
This is great news for the people that do put their properties on the market: with demand higher than supply at this time of year, they are more likely to sell. All of this can only help to generate further confidence in the housing market. Whilst writing this, a further three faxed offers have come through, so it’s fair to say that demand, even right at the end of November, remains very healthy. Will it remain into the new year? That’s the million dollar question, but my prediction is that it will as Help to Buy continues to help lending to First Time Buyers and others moving house. I’ll of course report on this in the new year too so, for the answers, continue to watch this space!
What Does Increased Demand Mean for House Prices in Your Area? Is There a Risk of a New House Price Bubble?
What tends to happen when demand outstrips supply? Well, prices go up because sellers can afford to demand more. Is there a danger of this creating a house price bubble? Simply: yes there is.
High demand and relatively low supply is great for house prices: if you want house prices to rise, that is! The risk of all this, however, is that we create seasonal peaks-and-troughs, with little price ‘bubbles’ being created during periods of low supply (winter) and then a dip when the majority of property sellers in Edinburgh and the Lothians pile their properties onto the market (spring/summer). This was covered in an article in The Scotsman newspaper earlier this month, with comment from yours truly towards the end (Property Bubble Alert as Demand Outstrips Supply – http://www.scotsman.com/news/scotland/top-stories/property-bubble-alert-as-demand-outstrips-supply-1-3184682).
The main risk I can see is that, once prices have been artificially pushed higher in the winter through low supply and high demand, sellers’ expectations on price won’t necessarily return to normal in the spring when the plethora of properties that buyers have to choose from returns to ‘normal’ levels. We already are having conversations with some of our selling clients, attempting to reset their expectations a little bit as they are reading that property prices are rising significantly (based on UK-wide stats that are distorted by London prices). A gap between sellers’ and buyers’ expectations regarding the value of property is what can bring the market to a bit of a juddering halt. The only way to avoid this, of course, is to educate our property sellers and buyers about what is actually happening, and articles like this one aim to do that.
I hope that you’ve found the content of this article interesting. If you do have any further questions about anything in this though, please just drop me a line and I’ll do what I can to help!
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