For anyone who has read the information and analysis provided so far, you know this will really depend on what type of property you have, what street it’s on and what’s happening to the economy in your local area.
However, we are always obsessed with knowing what’s going to happen next in the property market and so far this year, it appears there are, dare I say some ‘green shoots’ (yes I’m groaning too!).
However, we are now heading into year six of our property recession. Back in the 1990s, year six was a stabilisation of property prices while year seven showed them starting to turn.
When we compare this property recession to the last, I’m afraid it doesn’t look like 2013 will offer many more changes than the last two years. People may be more likely to move due to the usual reasons of death, divorce and debt, so the number of sales may start rising, but it’s unlikely in all but a few areas this will translate into property price increases.
As much as there are frustrated buyers out there holding off just in case prices fall further, there are also a lot of frustrated sellers. For example, many people have let their homes because they couldn’t sell and by now they will be realising that renting a home isn’t all about making money, it’s more about managing the tenant as well as the property and all the delights that come with it!
So many accidental landlords will be keen to sell as soon as they think the market is picking up. And just as these accidental landlords flooded the rental market in October 2008, crashing rental prices, so could this niche market prevent prices from rising by selling at a time when the number of buyers is increasing.
What this forecast shows is it is going to take a lot longer for property prices to recover than from the 1990s even if more lending is offered.
Consumer Confidence?
The GfK NOP index helps us to understand whether consumers are feeling positive about making a big purchase such as buying a home – or not.
The UK Consumer Confidence Index decreased by seven points during December suggesting a fall in confidence. This matches the very low sales figures achieved during that month. However, it bounced back in January, recovering some lost ground by increasing three points.
Nick Moon, Managing Director of Social Research at GfK comments,
“There’s a definite note of optimism in these findings, with clear changes in how people view the general economic situation in the past year and looking to the coming 12 months. More importantly, it looks as if there has been some good news for retailers this month (January) with people more willing to make major purchases compared to December last year. It’s worth noting however that people’s views of their own financial situation aren’t as optimistic, with no improvement expected in the next 12 months, and a drop of two places over last year’s personal financial situation.
This suggests it is too soon to say if more positive views on the general economy mark the start of sustained rise in the Index. Indeed, the continuing gloom from the high street and the talk of triple-dip recession makes that seem somewhat unlikely, but a rise in two months out of the last three is an encouraging sign”.
Unemployment Figures and Wages
As the double dip recession continues in the UK, according to the Office of National Statistics, surprisingly, the employment figures remained extremely healthy through to November 2012.
The Office of National Statistics September to November 2012 data shows the latest unemployment rate was “7.7 per cent, equally the previous quarter, but down nearly 1% versus a year earlier”. There were “2.49 million unemployed people, down 37,000 on the quarter and down 185,000 on the previous year”. The unemployment stats also show “The number of people unemployed for over one year was 892,000, down 5,000 on the previous quarter”.
Commenting on the UK labour market statistics, the Chamber of Commerce says
“Once again, unemployment is down, employment is up, and there is a modest decline in the number of economically inactive people. The new figures reinforce favourable trends that have been apparent over the past year, and raise continued questions over the accuracy of the much more pessimistic GDP figures.
Although it is clear that the economy has been stagnant for too long, talk of a “triple-dip” recession is unnecessarily downbeat and damages business confidence across the nation. The positive labour market figures provide a better reflection of the true state of the economy and are more consistent with the relatively robust level of business confidence shown by the BCC’s Quarterly Economic Survey”.
Further investigation of this rise suggests more people are setting themselves up in self-employment. This is good news economically, but it’s worth bearing in mind unless there is a fundamental change to the way the self-employed are viewed by lenders, this will not make any difference to the property market. Currently self-certified mortgages are virtually non-existent and anyone wanting to buy will need three years of accounts to support any mortgage application.
The government and industry may love the idea of more entrepreneurs, but unfortunately the lenders are not so keen and this could drive more people into the already under pressure rental market.
Construction Industry Output
According to figures recently released by the ONS,
“The estimated total volume of construction output in the fourth quarter of 2012 grew by 0.9% compared with the third quarter of 2012. The small rise in the total volume of construction output halts the decline first seen in the third quarter of 2011. The private housing and infrastructure sectors provided the greatest contribution to the increase in the fourth quarter, growing by 5.9% and 4.2% respectively, but are partially offset by decreases in new public non-housing work and private housing repair and maintenance, which fell by 4.9% and 4.8% respectively.
New work in the fourth quarter of 2012 grew by 1.6% compared with quarter three. The largest rises were in private housing (5.9%) and infrastructure (4.2%) partially offset by falls in public non-housing and private housing repair and maintenance (4.9% and 4.8% respectively”.
The ONS continued
“Over the year from the fourth quarter of 2011 to the fourth quarter of 2012, there was a 9.3% fall in total construction output. The overall fall in new work was 11.6%. There were decreases in all types of new work other than private industrial, but this is a small sector. The largest falls in new work were seen in public non-housing (18.5%) and private commercial (17.0%).
Repair and maintenance output fell by 4.7% over the same period. The only sector of repair and maintenance that grew in this period was public housing (3.4%). The fourth quarter of 2012 sees the continuation of the decline in public new work sectors (public housing and public non-housing) which, as reported last quarter, have seen an almost continuous decline since the fourth quarter of 2010.”
What we are seeing in these figures is public sector work decreasing, although things such as public housing and private housing are beginning to improve.
Better lending via schemes such as FirstBuy are helping to stimulate the new build market, although they are doing very little to help any buyers wanting to purchase a second hand home, which is typically 90% of the buying/selling market.
Housing Finance
The Bank of England reported that October, November and December all saw a rise in the number of new mortgages taken out compared the previous year, and during the whole of 2012, more mortgages were taken out than in 2011.
Commenting on the Bank of England’s latest figures, the CML reported
“Mortgage approvals in December were at their highest since the onset of the financial crisis in 2008. Lenders approved almost 56,000 loans for house purchase in December, the fifth month in a row in which the number increased. However, much of the current resilience in the mortgage market is driven by lending for house purchases. Of the approvals total of £12.6 billion in December, £8.3 billion was for house purchase and £3.9 billion for remortgaging”.
These figures suggest that demand is picking up via the funding for lending scheme and having seen a drop in mortgages in May, June, July and August, mortgage volumes have picked up significantly since September. Overall the number of mortgages agreed for 2012 will be higher than 2011, but only slightly.
Auctions
The auction market tends to be a lead indicator of what happens in the general buying and selling market. The EI Group tracks residential property auctions across the UK. Their latest figures suggest the number of lots sold during November was up 38% on November 2011, however in December, there was no real change versus December 2011. The percentage of lots offered was also up in November 20% on 2011, with December recording a very slight percentage decrease over the previous year.
This fits with the view that the property market is progressing forward with the ‘main’ market performing well leaving less to enter the auction market, hence December 2012 being very similar to December 2011.
Increased lot sales in November suggests property investors are fairly active in the market, again suggesting they see we are at the ‘bottom’ and now is the time to buy.
If you are not sure on what to do in 2013, get in touch, we can help and seeking professional advice either from ourselves or from your local expert estate agent is vital to work out what the right thing is to do from your personal circumstances as well as the local market perspective.
