Hung parliament could cause further period of uncertainty in property marketRecent Halifax house price index indicates that price growth has been slow
- Hung parliament could cause further period of uncertainty in property market
- Recent Halifax house price index indicates that price growth has been slowing
- Expert says surprise result has given market yet more ‘short-term uncertainty’
House hunters and potential sellers are facing a longer period of uncertainty after the result of a hung parliament in the General Election.
One expert says property transactions will stay ‘anaesthetised’ while another says the surprise result has given the market yet more ‘short-term uncertainty.’
Despite this, pundits claim it is likely that property values will remain propped up by a lack of supply – a common theme in recent times.
However, with house prices already slowing, there is also chance that property values could go into reverse.
Storm clouds: Expert Henry Pryor says the Election result has bowled the housing market another ‘googly’ – a cricket term for an almost undetectable delivery
What’s happening to house prices?
A slew of house price indices in recent months suggest that values are still growing, but at a far slower pace than last year.
For example, Halifax said on Wednesday that annual property price inflation was 3.3 per cent in May, the smallest annual growth in house prices for four years.
Martin Ellis, a housing economist at Halifax, said: ‘The fact the supply of new homes and existing properties available for sale remains low combined with historically low mortgage rates and a high employment rate, is likely to support house price levels over the coming months.’
Will house prices keep slowing or fall?
Henry Pryor, a buying agent, believes prices could soften during the rest of 2017 and that it could become a buyers’ market, with property values eventually falling slightly.
He told This is Money: ‘At Christmas, I went on record predicting house prices might end the year down two per cent – something that at the time was at odds with most of my professional colleagues.
‘The Election result has bowled the housing market another googly with yet more short-term uncertainty.
‘The good news is that with near political paralysis we’re unlikely to see much more change to taxes or regulation both of which were high on most of the manifestos.
‘The bad news is that uncertainty will result in more people sitting on their hands and doing nothing.
‘The three D’s – death, debt and divorce will continue to drive the supply side but their numbers or “enthusiasm” won’t be matched by buyers leading to softening prices – not just slowing house price inflation but potentially to actual house price falls.
‘Transaction volumes are also likely to be hit as buyers worry that what they bid for today may be worth less tomorrow.
‘The political weakness that may stall Brexit negotiations, the potential for another General Election in the months to come plus an uncomfortable post-election Budget is likely to undermine the market yet further.
‘All of this leads me to see this as a pretty worrying time for those looking to sell but potentially a good time for buyers.
‘I don’t expect rents to get much of a lift either, if anything they will continue to soften as the economy and wages slide.’
Jeremy Leaf, north London estate agent and former Royal Institution of Chartered Surveyors boss, says pent up demand should keep prices above water.
He said: ‘As far as property prices are concerned, we don’t expect too much change while the political shenanigans are ongoing.
‘But we have noticed on the ground that a lot of customers have been waiting for the election to pass almost irrespective of the result and therefore are likely to resume negotiations at a similar level to where they were before 8 June.
‘Therefore, we don’t expect any big change in prices going forward depending largely of course on whether the government can form a stable administration sooner rather than later.’
Slipping prices: The Halifax index earlier in the week indicated house values are slowing in recent months
What needs to change in the property market?
A dominant theme in the election has been the struggle faced by first-time buyers and families moving up the housing ladder.
That is pits them against an older generation that has built up substantial paper wealth from the rise in property prices over the past 30 years.
A plan to create less friction in the property market and make it easier for people to buy the homes they need would be welcomed, but coming up with it will be tough.
Mr Leaf says: ‘A hung parliament will result in an extended period of uncertainty with decision-making kicked into the long grass.
‘Stability is crucial in enabling people to make big decisions such as buying and selling property.
‘The hopelessness we are seeing on the ground about not being able to get on the housing ladder has come through. If there is one message that has come out of this election, it is that the young have voted overwhelmingly for change.
‘Politicians will have to consider the needs of the young more than they have in the past.
‘This could mean more help for first-time buyers, perhaps extending Help to Buy so that it covers older properties as well as new build, dealing with affordability issues and more help on stamp duty.
‘One thing all the parties agree on is that we need more housing so it has to be a priority for whichever formal or informal coalition is created.
Lack of supply: There is still a shortage of homes to buy – while mortgage rates remain low
What about outside the London and South East bubble?
The property market has been starkly divided since the financial crisis recovery. London, the South East and popular areas in the South bounced back strongly, while elsewhere around Britain prices remained stuck in the doldrums.
The past year to 18 months has seen that shift. London’s breakneck property inflation has slowed down – with central London prices falling – and the commuter belt surrounding the capital has fared better, but also slowed.
Prices in places such as the North of England and Midlands, which had lagged behind, have picked up, however.
Daniel Bailey, a mortgage and protection specialist told us that he expects prices to hold firm in many regions, especially going by local activity in his Sheffield area.
He said: ‘In parts of Sheffield my clients have been going to sealed final bids and one client paid £50,000 over the asking price.
‘Still a limited amount of good stock on the market with a lot of buyers chasing the same property.
‘Mortgage availability is still strong and rates extremely low. It will be very much regional but in the Sheffield area I would expect prices to hold firm.’
Simon Rubinsohn, of Rics, said: ‘The election is likely to lead to more subdued activity, with some doubts about how policy will evolve.’
However, he adds that beyond the summer, the property market is likely to pick up.
London: Could a weakened pound lead to more foreign investment pouring into the capital?
Will foreign buyers be back with a weak pound and softer Brexit?
A weakened pound and perceived softer view on Brexit – sterling was down an average two per cent against 158 different currencies yesterday morning and will remain under pressure – may lead to more foreign investment in London, pushing up prices in the capital.
According to experts at London Central Portfolio: ‘The UK looks set to face an extended period of uncertainty, historically unattractive to inward investment.’
It added: ‘It is anticipated that transactions will continue to fall in prime central London whilst investors assimilate the new situation, particularly at the luxury end and in the new build sector, already battered through the introduction of new residential taxes.
‘For the domestic housing market, outside Prime central London, the recent evidence of a downturn by most data analysts, due to concerns over a weakening UK economic position and rising inflation, is unlikely to be reversed in light of the current events.’
Subdued: One expert believes home mover activity will be scuppered in the coming months
Will you be able to move?
The key question for those hoping to move home is will they be able to sell and find a home to buy. That requires a decent level of activity in the market, something which more subdued prices could actually help with.
James Greenwood, of Stacks Property Search, adds: ‘In London, prices are approximately 20 per cent lower year-on-year.
‘We expect buyers, especially overseas investors who will take advantage of a suffering pound, to take advantage of this window that will almost certainly remain open until we have some answers to the Brexit question.
‘In rural areas, prices have been steady for some time, offering sellers and buyers a stable market to operate in with no volatility to contend with. There has been plenty of opportunity for good negotiation.
‘There is a severe lack of stock in many parts of the country, so good property is selling well. But we don’t expect much price movement over the next year. The politicians have given vendors no reason to start raising prices.’
Pradeep Raman, chief executive at online mortgage broker Dwell, said: ‘In spite of this morning’s results, I expect continued strength in the first-time buyer market thanks to strong employment numbers and the slowing of house price rises this year.
‘I also expect mortgaging and re-mortgaging activity to remain strong as the trend of mortgage lenders cutting rates is continuing.
‘The one area I expect to be subdued is home mover activity. Brexit and a potential uncertainties around the Government may lead to borrowers to wait and see how things pan out.’
Meanwhile, Russell Quirk, founder and chief executive of online agent eMoov, said: ‘I fear that the property market’s post-election return to normality that I’d hoped for may be rather further away still.
‘Political instability breeds procrastination on the part of homebuyers and sellers and for over a year now we have seen the effects of that on volumes, if not so much prices, as a consequence of the EU vote and then the snap general election.
‘A hung parliament means that Theresa May does not have the mandate that she sought for herself and for a ‘hard Brexit’.
‘Transactions in the property market may also stay somewhat anaesthetised until it’s re-awoken by something more politically and economically decisive than we have seen over the past 24 hours.’