What next for the property market?


Now that the usual summer slowdown is over many prospective buyers are resuming home-hunting, but what’s been happening in the Fulham property market?

Sealed bids, surging prices, London’s prime housing market recovered well following the 2009 financial crisis, but it ran out of steam after the former chancellor George Osborne decided to reform stamp duty in December 2014, making the property acquisition tax more expensive for anyone acquiring property close to £1 million and above.

Home values in some of the capital’s prime areas, including parts of Fulham, have dropped since the change to the levy, while the number of properties changing hands has declined significantly, as Londoners continue to be hit by high stamp duty levels compared to buyers in the rest of the country.

The government’s decision to introduce further stamp duty reforms in April 2016 in the form of a 3% stamp duty surcharge on second homes, only served to add to the market’s woes in London.

Analysis of data from the Land Registry and Zoopla shows that the number of property transactions has declined by around 35% in the capital since the stamp duty surcharge was introduced last year.

The most significant slump in activity has been witnessed at the top end of the market, where only 9% of properties above £2 million were under offer at the time of research, while just 18% of properties between £1 million and £2 million were under offer.

This compares poorly to properties priced less than £500,000, of which 41% were under offer across the country, indicating that the lower end of the market, as expected, is functioning much more efficiently than the upper end.

Activity levels have also been stifled by political uncertainty caused by the general election and ongoing Brexit negotiations, as well as a slump in housing supply on the market, with the Royal Institution of Chartered Surveyors reporting that the average number of homes on surveyors’ books has now dropped to the lowest level since records began in 1978. But that could be about change.

Busy autumn period
Following a slow start to 2017 which lasted up until the general election in June, there are signs that as we usher in the historically busy autumn market, prospects for an increase in supply of property to the market is looking good, reflected by the pickup in the number of homes Brik is currently taking on for sale.

This is a strong indication that the housing market could start to gather pace now that the usual summer slowdown is over and many prospective buyers are returning from their holidays to resume home-hunting.

Historically, September, October and November is always full of activity with those who wish to sell before the end of the year rushing to capitalise on the busy market before the quieter Christmas and New Year period take effect.

But despite the anticipated rise in new instructions, the supply of property is likely to remain well short of the required mark, as demand for homes in and around Fulham continues to improve, supported by a healthy labour market, solid employment growth, record-low borrowing rates, and greater political certainty following the recent general election.

UK Finance has estimated that gross mortgage lending, a reliable indicator of future housing activity, reached £22.1 billion in June, which is 9% above the total for May.

The trade body, which encompasses the former Council of Mortgage Lenders, says that the June 2017 total is 3% higher than the £21.5 billion lent in the same month last year.

“Lenders have continued to pile into the owner-occupier market, and south London is still their favourite place to lend,” said Liam Brooke, co-founder of Lendy.

Gross mortgage lending for the second quarter of 2017 was an estimated £60.3 billion, a 3% rise on the first quarter of this year and a 6% on the £57.1 billion lent in the second quarter of 2016.

Jeremy Duncombe, director at Legal & General Mortgage Club, believes that when compared to the wider economic and political landscape, the housing market has continued to “amaze many”.

“It [the market] has remained consistently robust, despite everything we have seen over the last 12 to 18 months,” Duncombe added. “In light of this, there is nothing to suggest that the market is in dire straits.”

Looking ahead, Foundation Home Loans marketing director, Jeff Knight, believes that “purchase incentives” and “continued low mortgage rates” will continue to take the edge off uncertainty in the market generated by the wider political and economic picture.

The last time there was a general election was in 2015, which proved to be a year of two halves for the housing market, with the slow start to the year cleaved by the election which took place in May, followed by an uplift in property prices and a flurry of housing market activity, once election uncertainty was out of the way.

Despite the initial shock caused by this year’s hung parliament, the local housing market has remained resilient, illustrating the fact that even during times of economic and political uncertainty, property in and around Fulham remains a safe investment.

There were some initial fears that activity in the local housing market would be adversely affected by Brexit, but in essence, Fulham’s appeal has been underpinned by strong national and international demand, with overseas nationals drawn to an area that features some of London’s most desirable properties, not to mention the fact that it is thriving with trendy pubs, restaurants and boutiques, and is very popular with young professionals as well as families.

In particular there has been a noticeable surge in enquiries from overseas purchasers seeking to acquire homes in Fulham thanks partly to a drop in the pound’s value, with those buying in euros or dollars and index-linked currencies now enjoying significant discounts on UK property prices post-Brexit.

Camilla Dell of buying agency Black Brick, commented: “The fall in sterling has seen cost reductions in the 30-40% range for dollar buyers which is partly the reason why these buyers [from overseas] are keen to invest.

“Many have decided that this is the year to add to their London portfolios and we have been instructed by a number of families to start the property search.”

It is important to remember that the residential property market in the UK tends to be cyclical, moving in upward cycles of boom, bust and stability, and that trend looks set to continue, with a recent report from Barclays forecasting that home prices offer plenty of room for growth moving forward.

The bank estimates that the average price of a home in the UK will increase by 6.1% by 2021, fuelled in part by greater activity among buy-to-let investors and high net worth individuals.

Barclays predicts that property hotspots will emerge in the north of England thanks to employment opportunities and business start-up rates, but it ultimately expects to see price growth in London lead the way, with well-heeled areas like Fulham ripe for future growth.

Rental market
A strengthening sales market is traditionally associated with weaker rental demand, as more households choose homeownership over renting.

But Brik’s letting team reports that demand from tenants is continuing to grow as we enter the busy autumn rental period, which marks the start of the academic year and a time when large relocation agents and blue chip companies typically seek accommodation for their finest new recruits. Fulham attracts all sorts of renters, including a high number of corporate tenants, many of which are looking for long-term property rentals.

Like the sales market, the combination of higher demand and low supply will place upward pressure on rental values in the coming weeks, although the level of increase will vary according to submarkets and price bands.

Richard Donnell, insight director at Hometrack, said: “London has the largest and most liquid rental market. Demand in the capital has been buoyed by employment levels rising two to three times faster than other regions, as well as the much higher deposit and household income required to buy making the transition from renting harder than in the past.”

In summary, the outlook for the autumn sales and rental markets are very encouraging, and so our advice to anyone thinking of selling or letting is simply, ‘strike while the iron is hot’.