Promising start to the year for the property market?

It’s hard to believe we are already at the end of February 2017!

The Royal Institution of Chartered Surveyors (RICS) are predicting that housing prices will increase by 20% over the next 5 years (4% per year), and that Rental Prices will track slightly higher than this at 5% annually. This is of course an average across the country and across all property types, so it doesn’t follow that all properties will increase in value. Some areas will see a decline.

The forecast is based on RICS expectation that there will continue to be less properties on the market for sale or rent than there is demand. This is consistent with previous articles we have written, and in the short term, we do not anticipate any change in this trend.

It also highlights the ongoing problem the government faces in building enough properties to meet the demand in the market (see our article on the Housing White Paper).

This is further supported by the January UK Cities House Price Index from Hometrack

Although their report shows a higher year on year growth of 6.9% to January 2017, the trend for the last six months is significantly lower. This slowdown is consistent with the largely “wait and see” approach we have seen since the vote for Brexit.

The report also highlights some major cities where there has been a decline in house prices, most notably London (due to the decline in foreign investment) and Aberdeen (due to employment concerns). Bristol recorded the highest year on year growth at 9.5% and Manchester is the fastest growing city outside southern England where prices are up 8.3%.

Source: The Rightmove House Price Index – February 2017

 

 



This market data did prompt an interesting warning from Rightmove. Miles Shipside, Rightmove director and housing market analyst comments “The majority of the market is price sensitive with most agents we surveyed reporting that possible buyers are reluctant to enquire about a property just a few percent too high in price. With the annual rate of price increase now at 2.3% a property that is over-priced by more than 5% will have to wait more than two years for the market to catch up with it. Some sellers may have thought there is no price to pay by starting high and reducing the asking price later. However, our extensive tracking of properties that have found a buyer shows that your property should substantially out-perform the level of interest in similar properties in your local area during the first three weeks of marketing to minimise the risk of being left on the shelf. Over-pricing loses you that vital initial interest and impetus, and buyers often have reservations about a property that has not sold as quickly as others or has had a price reduction”

 

Our view is that as tempting as it may be to over price your property, the first few weeks of marketing offers the highest chance to sell the property. Over pricing may not only result in the property being on the market for an extended period of time and reduced in price over that period, but may ultimately result in you achieving a lower price for your property, than if you had put it on at the correct price initially.

 

The report also showed the average time on the market nationally for sales properties.

 

 

This time frame will obviously vary based on the size and price of the property.

 

Lettings Market

In the Lettings market, Agency Express, one of the largest national estate agency board erecting companies reported that following a slow December, the number of new properties TO LET coming to the market increased by 50.8% over December 2016, and compared favourably to a monthly increase of 43.6% in January 2016. The data also shows that activity in January has been steadily increasing over the past three years

 

This is consistent with the market we have seen in Basingstoke, although the staggered half terms for Hampshire and Berkshire have seen a lull in Tenant applications in February.

 

While the various reports and data definitely show a mixed picture, our view is that demand will continue to drive prices higher in the Basingstoke area, although this increase maybe slightly lower than during 2016.