UK residential property market shows signs of improvement

UK market improving

House hunters returned to the UK housing market in January as demand figures reached a six-month high, according to the National Association of Estate Agents (NAEA).

The NAEA latest market report showed there was an increase in both supply and demand for housing compared with December, although this remains in line with figures from the same time last year.

The number of people registering with estate agents to buy property improved from an average of 227 in December to 252 in January however this is still down on January 2010’s figure of 291.

While both the end of the holiday season and back log in demand following December’s big freeze helped to boost activity in January, this latest reports suggests there is still a considerable number of consumers reluctant to enter the market.

The number of houses available for sale increased from 64 per branch in December to 69 per branch in January indicating that demand for property can be met in the short-term, which will ensure stability. The average agent sold six properties in January compared to four in December.

‘It is encouraging to see activity levels begin to increase following the downturn we saw in December where bad weather and the Christmas festivities kept many house hunters away.

However, when compared with our report from this time last year, the market is still showing signs of consumer reluctance. Macro economic issues such as the VAT rise and interest rate pressures continue to put many people off searching for property,’ said Michael Jones, president of the NAEA.

There is still a lot of concern about lack of loans for buying property. ‘What we need to see now is the Financial Services Authority using its newly gained powers of oversight to ease mortgage lending restrictions that are preventing so many first time buyers from entering the housing market,’ said Jones.

‘The percentage of sales made to this consumer group decreased slightly from 25% in December to 24% last month. We must ensure that their aspirations for property ownership can be met,’ he added.

According to Paul Broadhead though, head of mortgage policy at the Building Societies Association it is not merely the shortage of mortgage funding that is causing difficulties in the housing market for first time buyers.

‘There have been increasing affordability issues in recent years as house prices outstripped earnings growth. There are also demand side factors to consider such as volatile house prices and job insecurity which continue to make potential first time buyers nervous,’ he said.

He believes that just focussing on first time buyers will not help the market recover. ‘Any initiatives focussed purely on first time buyers, without a sufficient increase in house building, could push prices up for entry level properties, particularly if second time movers have low or negative equity,’ he explained.

‘Funding, both the availability and cost of it, continues to cause difficulty for mortgage lenders.  As does the increased cost of lending at higher LTVs through new capital requirements,’ he added.

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