House sales in Wales hit 6 year peak

The amount of homes sold in Wales over the past three months reached its highest level in six years as buyers across the country continue to return to the market,says the latest RICS residential market survey (11 June 2013).

Chartered surveyors in Wales sold on average 18 properties during the three months to May, representing the highest reading since June 2007.  Furthermore, sales are expected to continue their rise over the next three months with a net balance of 30 percent more respondents predicting transaction levels will grow rather than fall (from +25 percent).

Despite an increase in sales, the number of properties coming on to the market took a dive with a net balance of - 8 per cent of surveyors reporting a rise in new instructions.  The figure stood at +7 percent last month.  Average stocks per surveyor now stand at 103, down from 110 in April.

Meanwhile, prices up edged last month with ten percent more chartered surveyors in Wales reporting increases rather than decreases. Until recent months price stability has been confined largely to the South East of England and London, whereas now this is beginning to extend to other areas of the UK.

Differentiating from the sales market in Wales, the rental market saw a drop in tenant demand this spring. Interest from would-be renters fell to a net balance of 21 percent during the three months to May (from +48 percent in April). In tandem with the fall in demand, a decreasing number of landlords placed their properties on the market during the last quarter. A net balance of just 4 percent more Welsh chartered surveyors reported rises in new instructions, a significant decrease on the previous quarter’s reading of 36 percent.

Tony Filice, RICS Wales Residential spokesperson and Director of Kelvin Francis Chartered Surveyors, Cardiff, said:

“Demand in the ‘First Time’ buyers market is now exceeding supply, leading to full prices being achieved.  This is already filtering through to the middle market and will hopefully filter to the upper levels in due course.  Confidence is high with the general public who feel that now is the right time to buy, complimented with the right choice of mortgage product at favourable rates.  Green shoots are now flowering.”

UK house sales on the rise say surveyors

The May 2013 RICS Residential Market Survey results highlight the significant improvement in sales

market sentiment that is underway, with both the current and forward looking indicators touching

multi-year highs. 

This improvement is largely attributable to the Bank of England’s Funding for

Lending Scheme, but the Government’s Help to Buy policy may also be beginning to play a role.

The activity picture has improved markedly, with the newly agreed sales balance increasing from 21

to 30 and the new buyer enquiries balance rising from 27 to 30. Both indicators have reached 2009

levels. 

The pick up in buyer interest over the last three months or so appears to be enticing more

homeowners to test the market, with the new vendor instructions balance reaching 15, up from 8.

In spite of the increase in new instructions, average stock levels (per branch) actually fell on the

month, which allied to a rise in average sales levels, pushed up the sales to stock ratio to 27.5%.

This gauge of market slack has increased by 5 percentage points over the last twelve months.

However, it is still some way below its long average of 32.5%, indicating that while market conditions

have tightened recently, at the national level they are still ‘looser’ than normal.

The better tone to the activity picture is also reflected in the survey’s forward looking measures. The

sales expectations balance at the 3 month horizon increased from 26 to 35, the highest reading since

May 2009, while the same measure at the 12 month horizon remain stable at 55.

Meanwhile the pricing picture is also brightening. The price balance increased from 1 to 5 and the 3

month price expectations balance increased from 12 to 20. The survey also measures expectations

in actual percentage terms and on this basis, respondents now expect house prices to increase by

1.4% over the next 12 months, compared to 1.1% last month and 0.1% in December.

There remains considerable regional variation, with prices over the next year expected to increase by

4.1% in London compared to 0.2% in Yorkshire and Humberside. 

Nevertheless, given that many parts of the UK are still experiencing house price falls in year on year terms, it is noteworthy that respondents across all of the survey’s regions are now expecting positive price growth over the next 12 months, including Northern Ireland at 0.6%.

On the lettings front, the data - which is not seasonally adjusted on a monthly basis due to its short

history - suggests growth in tenant demand remains firm and continues to outpace growth in landlord

instructions.

As a result, rents are expected to continue rising over the near term, with the rental expectations

balance little changed at 21. As with the sales market data, the survey also measures 12 month

expectations in actual percentage terms, and here respondents now expect rents to increase by

1.4%. This figure has barely changed over the last 6 months. Moreover, it is interesting that while

price increases are expected to be greatest in London, rental expectations in the capital are far more

aligned to the national average.

4,000 reserve new home in Help to Buy scheme

Around 4000 people have reserved a new home using the Equity Loan part of the Government’s flagship Help to Buy scheme in just two months.

The Equity Loan scheme, launched on April 1, has already seen developers committing to increasing supply, but with the scale of demand for the scheme now becoming apparent, it is clear the industry will be able to significantly increase output. 

The Help to Buy scheme has two parts to it. The Mortgage Guarantee element is due to start next January and is aimed at stimulating the whole housing market. 

In the meantime, the Equity Loan part – under which Government helps the purchasers of new build homes secure a mortgage with at least a 5% deposit by granting an equity loan of up to 20% – has got off to a ‘flying’ start. There are now more than 400 builders across the country registered for the scheme.(More details on both schemes at foot of release.)

Interest has been huge and there are now on average around 500 people a week taking advantage of the scheme. Large deposit requirements have been the biggest barrier to people’s ability to buy, and thus builder’s ability to build.  The Equity Loan scheme – allied to the industry’s NewBuy scheme that has had over 4500 reservations - means people can get onto or up the property ladder with a 5% deposit. And because buyers only require a 75% first-charge mortgage under the Equity Loan scheme, homes are very affordable.

House building levels in England are currently around half (115k p/a) those needed to meet the formation of new households(220k p/a)^1. Just 88k private for sale homes were built last year. Since 2007 output has dipped to levels not seen since the 1920s, with the resultant social and economic implications. But with effective measures now in place to support demand, and consumer interest increasing, the industry is confident supply can be increased.

Stewart Baseley, Executive Chairman at the Home Builders Federation said;

“The Equity Loan part of Help to Buy has got off to a flying start. It has been an unqualified success so far and 4000 reservations in just two months shows both the consumer demand for the scheme and developers’ commitment to it.

“The large deposits required in recent years to secure a mortgage have prevented many from buying – and as a result, builders from building. The Equity Loan scheme helps consumers overcome that deposit barrier and as a result the scheme will undoubtedly lead to an increase in house building - already we are seeing companies revise their projected build levels as a direct result of the scheme. This in turn will create jobs and deliver an economic boost.”