Monthly Market Review – September 2013

The UK property market has been the subject of intense focus throughout September with talk of ‘bubbles’, ‘ripples’ and ‘dips’ as once again market data underlined momentum building and improving conditions. Media attention, political opinion and industry announcements have resulted in a period of great debate. Garrington feels that September has seen key developments and announcements which look likely to shape the property market for the remainder of 2013 and will continue to set the scene well into 2014.

Prices continue to edge forward

Yet again, all the main indices registered an upward monthly movement in average values across the UK in their September releases. These ranged from 0.1% from the Land Registry to 0.9% from Nationwide, which also reported unilateral growth across all 13 UK regions for the first time since 2007.

However Land Registry data (which gives a ‘whole of market’ view) underlines the importance of looking beyond the broad statistics and highlights the fact that, despite the overall trends and improving health of the market, it operates on a truly micro level. For example its figures show a drop in values of 1.4% since August in the North East, whilst also highlighting that the district of Newcastle-Upon-Tyne saw growth of 1.4% over the same period. Likewise, in London, Hackney has seen an extraordinary annual growth of just under 13%, whilst prices have fallen by 1.7% in the neighbouring borough of Newham since 2012.

Garrington has seen far too many sweeping generalisations this month, and believes that they serve to cause uncertainty for both buyers and sellers. As a result we are seeing an increasing number of new clients approaching us seeking clarity in a confused market place. Deals need to be carefully managed as conflicting information abounds and affordability is nearing historically low levels, as seen in the chart below.

Property politics

Property always comes to the fore during the political conference season. This year’s big surprise was George Osborne’s announcement on the early launch of the second phase of ‘Help to Buy’. Many are critical of the timing as it appears to be a somewhat rushed, crowd pleasing move, with possibly a negative impact on a still fragile and price sensitive market. A proportion of the industry feels that, whilst the scheme is essential in certain parts of the country, it will only serve to overheat already frothy markets in the South East where demand is high and supply is particularly low as illustrated below.

It is also interesting to note the response of lenders to the announcement, as at the time of writing, only HSBC and the government backed banks have agreed to participate whilst others wait to hear more of the detail. It seems many are fearful of a future affordability issue once fixed rate periods expire and mortgage rates begin to rise again.

We consider it premature to assess the overall viability of the scheme, and we watch with interest to assess the volume of participants and the broader effects it could have on the market as a whole. We also plan to monitor the lower end of the market which could become highly competitive and as a consequence, possibly over-valued. This coupled with a potential ‘softening’ of rental values as long-term tenants decide now is the time to buy could mean a shift in strategy towards different profile or higher value properties for investors.

A change for the better?

Once again it seems that the market is undergoing a period of change, and in property terms this can lead to a pause in activity as people wait to see what will happen next. The market is clearly encouraged by recent growth and activity levels, but in some places, Help to Buy could have a detrimental effect.

Garrington believes the scheme currently raises more questions than answers. One thing is certain – the market for the moment still looks set for a busy October, but the underlying question remains as to whether this will be a month of futile activity or genuine progress for the UK market?

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