he country is divided 52%-48% — only this time we’re not talking opinions on the European Union, but on whether now is a good time to buy a property.
Analysis of data compiled exclusively for The Sunday Times Home shows that in 52% of postcodes in England and Wales, there has been a post-election surge in buyer demand — the so-called Boris bounce.
Yet strangely, the election of a pro-Brexit prime minister seems to have left remainers feeling buoyant, with many of the locations that have experienced the greatest increase in buyer demand those that voted to stay in the EU in June 2016. Several are also affluent areas, where buyers may have feared a higher tax regime under a Jeremy Corbyn-led Labour government.
Miles Shipside, director and housing-market analyst for the property portal Rightmove, says: “The early birds are on it, with almost a million buyer inquiries to agents since the election, up 14% on the same time a year ago. Some buyers are even further ahead and have snapped up a property already, with the number of sales agreed up by 7.1%. There seems to be a release of several years of pent-up demand, which suggests we are in for an active spring market.
“The fundamentals are sound, with lenders keen to lend at low fixed rates, average wages rising and employment at a record high. The bounce seems to indicate that buyers and sellers feel the election result gives a window of stability — so, if you have been a ‘Brexit delayer’, 2020 could well be the year to move.”
Where is the bounce being felt?
The areas where buyer sentiment has turned most dramatically since the election include Cambridge, where 80% of CB postcodes have seen an increase in buyer demand compared with last year, Bath (74% of BA postcodes), York (65.5% of YO postcodes) and Bristol (61% of BS postcodes), according to analysis carried out for The Sunday Times by PropCast.
The property-market forecasting website compared the change in buyer demand (the percentage of properties under offer relative to the available stock of properties for sale) between the periods November 2018 to January 2019 and November 2019 to January 2020. All four cities voted to remain in the EU referendum.
The individual district that saw the greatest surge in buyer demand was L29 (central Liverpool and Sefton, both remain areas popular with buy-to-let investors as well as families). The second biggest increase, however, was in RG28, in the rural Test Valley, Hampshire: a pro-Brexit area.
Gavin Brazg, founder of PropCast, says: “There are pockets across the country that have experienced a surge. This is to be expected, as a lot of buyer demand had built up in the market in the run-up to the election. Clarity brings confidence, and confidence brings the buyers out to play.”
Richard Freshwater, director of residential sales at the Cambridge office of Cheffins estate agency, says: “We are starting to see competitive bidding. I think buyers have been holding off, but in terms of the housing market, the election result was the best it could be. It offers stability — people think decisions will be made now. Interest rates are still low, people don’t want to rent and they see value in the market. Potential vendors are starting to see properties sell, too, which is enticing them onto the market.”
That said, it’s not a one-way street, Brazg cautions. “Many sellers are feeling that the pendulum has swung in their favour, but it may well be a false dawn for the UK property market, and those sellers who dig in their heels and hang on for a premium offer may find 2020 feeling very similar to 2019.”
Will this push up prices?
Rightmove reported a 2.3% increase in the price of property coming to the market between December 8 and January 11, with demand outstripping supply in many places. “While a substantial rise is the norm in January, buoyed by the start of a new year, this is the biggest price surge that we have ever recorded for this period,” Shipside says. “However, it is still a price-sensitive market, with stretched buyer affordability, so sellers should be careful not to get carried away with their pricing and miss out on this window of increased activity. One factor behind the upward price pressure has been the shortage of property coming to market in many areas of the country.”
While there are plenty of tales of competitive bids and houses being sold for more than their guide price, much of this is because sellers are holding back — possibly waiting until spring, when their gardens will look better, or in the hope of a more lasting rise in prices later in the year. This has left estate agents complaining that they don’t have enough stock to satisfy buyer demand.
Ben Pridden, head of residential sales for Savills in York, thinks many homeowners are indeed holding off until spring. “This means there is a window of opportunity for buyers — particularly at the top end, where there is still perceived value — before prices start going up.”
That may not last long once more sellers, enticed by the sight of “Sold” signs in their neighbourhoods, start to venture out — a process that other agents say is already happening. “There are lots of new people coming into the marketplace,” says James Toogood, head of Knight Frank’s office in Bristol. “And as a result of the sudden appetite to have your home valued, we’re taking on lots of stock. People who have been on our books but dormant are also suddenly back with a positive outlook, ready to start viewing.”
Richard Donnell, director of research and insight at Zoopla, says: “We’ve seen a strong surge in confidence following Boris Johnson’s majority win. In Greater London, for example, £2.7bn worth of new listings have been added to Zoopla since Boxing Day, heralding the return of sellers in the capital.” With confidence returning and the market appearing to pick up pace, he says it’s an opportune time for serious vendors to get their homes on sale.
As more properties come onto the market, prices should level out, as long as neither buyers nor sellers get carried away. There is a danger, though, that the latter might get a little overexcited.
“Sellers recover their confidence quickly, sometimes too quickly,” says Trevor Abrahmsohn, founder of Glentree Estates, a top-end London agency. “This raises their expectations of value beyond the willingness of buyers to pay and could hold back transactions.”
Another prime central London agent sums up the situation: “Buyers now have the confidence to come off the fence, but they don’t want to pay tomorrow’s prices.”
What does this mean for first-time buyers?
“First-time-buyer activity has remained strong, buoyed by cheap interest rates and the high costs of renting,” Shipside says. “The downside of this high demand is upward price pressure, with the average price of a typical first-time buyer property hitting a record high.”
Rightmove’s data shows that newly marketed properties with two bedrooms or fewer have a national average asking price of £193,103 — rising to £401,000 in London. And the latest figures from the Office for National Statistics show that there were fewer first-time buyers in 2018-19 than the year before — 727,000 compared with 785,000 — as high rents continue to stymie their attempts to save for a deposit.
Yet Shipside adds: “The annual rate of [house price] increase remains fairly modest at 1.6%, less than the rate of growth in average earnings, so affordability has actually improved a little for first-time buyers.”
Those looking to step onto the first rung of the ladder could also benefit from reduced competition if, as pledged, an additional 3% stamp-duty levy is introduced on non-resident buyers in the budget on March 11. More landlords may also sell up as a result of tax changes coming in on April 1, including the reduction of mortgage interest tax relief to 20%.
First-time buyers will also be eagerly awaiting news of the government’s promised First Homes Initiative and the Conservative manifesto pledge to offer them long-term, fixed-rate, 95% loan-to-value mortgages.
How about second-steppers?
Buyers looking to move on from their first home have seen the gap between the price of an average flat and a typical terraced house increase in every region of the country, according to Savills.
In 2017, the average terraced house in the southeast cost £264,000, which was £59,000 more than the typical flat. The most recent data shows that this gap has grown by 14%: households now need to find an additional £67,300 on average to move from a flat to a terraced house in the southeast. It has grown even more rapidly in the West Midlands: there, the additional cost has leapt by 30% from £21,500 to £27,900.
“In recent years, the government has thrown everything but the kitchen sink at helping households buy their first home,” says Lawrence Bowles, research analyst at Savills. “In doing so, they may have neglected owners whose homes are no longer suitable for them. Data from UK Finance shows that there were just 342,300 mortgaged home moves in the year to November 2019, less than half the peak before the global financial crisis.”
Some may be hoping that the chancellor surprises us all with a stamp-duty cut in the budget, but this is unlikely, according to Robin Chatwin, head of sales in southwest London for Savills. “Buyers are keen to take advantage of low interest rates, a market that seems to have bottomed out — indeed, we saw marginal price growth last year — and the expectation that the gap between their existing home and the next rung up the ladder is only likely to grow. But given the high cost of transacting, particularly stamp duty, buyers remain cautious and have a fixed upper budget in mind.”
“By contrast, sellers have firmed up — someone who might have taken 5% below guide last year will now be looking for at least the asking price. Matching buyer and seller expectations is becoming more of a challenge, and this can prevent anyone getting what they want.”
All of which just goes to show that, when it comes to bounces, there will always be highs and lows.