Tom Bill, an expert in UK residential research, has shed light on the recent developments that are shaping the future of property transactions in the country.
Inflation, which affects the overall cost of living including how much people pay on their mortgages, has seen a significant drop. This has led to a decrease in mortgage rates to below 4%, a relief for many. However, the housing market itself seems to be lagging behind this positive trend. Three major announcements last week have illustrated this peculiar situation:
- Nationwide’s House Price Index showed a slight increase of 0.7% in January, a positive sign, though the annual rate still shows a minor decline of 0.2%.
- The Bank of England reported a small rise in mortgage approvals in December, hinting at cautious optimism.
- HM Revenue & Customs (HMRC), on the other hand, painted a less rosy picture with a decrease in housing transactions in December.
These mixed signals suggest that while there’s growing optimism, the reality of buying or selling a house might take a bit longer to reflect this sentiment.
What’s Next for the Housing Market?
According to Knight Frank’s analysis, as the market’s delayed responses begin to catch up with the positive economic indicators, we can expect to see an increase in both sales volumes and house prices throughout the year. There’s even talk of a “spring bounce” in activity, especially if political events unfold as planned.
Interestingly, in London’s prime locations, the market seems to be waking up. There’s been a noticeable uptick in the number of valuation appraisals requested by sellers and an increase in new buyer registrations. However, the number of sales instructions and exchanges have dropped, highlighting the current mismatch between optimism and actual market activity.
The State of London’s Prime Property
The prime central London market has been tough for sellers, with average prices dropping by 1% over the last quarter, culminating in a 2.3% annual decline as of January. Prime outer London, however, has seen stable prices, leading to a narrower average annual fall of 1.5%.
Political Uncertainties Loom
While the economic environment stabilizes and mortgage rates become more favorable, political uncertainties threaten to shake things up. The possibility of internal conflicts within the Tory party and the prospect of an early election could introduce new variables into the housing market equation. However, many believe that the potential for a Labour victory in the upcoming general election is already factored into the market’s expectations.
In Summary
The UK housing market is showing signs of life, with falling mortgage rates and increased interest in prime London areas. However, the full impact of these positive developments is yet to be seen in actual sales and prices. Political developments remain a wildcard that could influence the market in unexpected ways.