Residential Property Focus

Residential Property Focus
 
Slow on the uptake

3 November 2016, by Lucian Cook

Transaction levels are set to fall back in the period to 2018 with a recovery to follow. What exactly does this mean for different buyer types across the UK?

 

FIGURE 3

Transaction forecasts

 
Transaction forecasts

Source: Savills Research, HMRC, CML

Housing transactions are arguably of more relevance to the general public and the housing industry than house prices.

After all, they reflect people’s inclination and ability to get on, trade up, trade down or invest in the housing market. In turn, that can effect how much and what we build, not to mention the pressure placed on everything from family housing to the private rented sector.

A fall in sales

Without pulling our punches, we expect transaction levels to fall back by 16% in the period to the end of 2018. Having reached a post credit crunch peak of 1.33 million at the end of March this year, we then expect a recovery back towards around 1.24 million sales per annum by 2021.

These headline figures initially reflect the short-term impact on buyer sentiment of economic and political uncertainty. They then echo the longer term effect of mortgage regulation, that prevents a return to levels regularly seen pre credit crunch. However, this is far from being the whole story.

Help needed

First-time buyers will face significant ongoing challenges in raising a deposit without financial assistance.

While the Bank of Mum and Dad will continue to play a role in meeting their funding shortfall, we also expect they will continue to rely on schemes such as Help to Buy. Increasingly, such measures look like they will need to become long-term features of Government efforts to sustain house building and home ownership.

Meanwhile, the numbers of home movers with a mortgage continues to be heavily suppressed, having shown precious little growth in the past five years, as existing owners trade up the housing ladder less often.

Impending regulation

In comparison, buy-to-let investors with a mortgage have seen their numbers almost double in the past five years. While only representing 10% of the market, this has been a concern for both the Government and the Bank of England. The result has been a combination of tax disincentives and impending mortgage regulation. Though these measures do not herald the death of the mortgaged buy-to-let buyer, they are likely to become thinner on the ground.

Finally, there is the cash buyer. Greater in number than before the credit crunch, their power may be tempered by greater stamp duty for the investors among them. But this is likely to be offset by greater pension freedom and more downsizing as they look to help younger generations follow their path to financial security through home ownership.

 

 
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