Letter: Housing market on the mend as initiatives start to take hold
A recent report from the Royal Institute of Chartered Surveyors (RICS) has confirmed a trend that we have been witnessing for some time in Shropshire; that not enough houses are coming to the market to meet what it describes as 'rocketing demand'.
This has been fuelled essentially by speculation over a recovery in the housing market (which has hit near hysteria levels in some media), and initiatives at the lower end of the market such as Help to Buy.
For those considering selling in the new year, a receptive audience of potential buyers presents a real opportunity. With some time still to forward plan and to transform the property, making it as saleable as possible, sellers of the 'best in class' houses are in a favourable position.
Some commentators have gone as far as to suggest that the shoots of recovery we are seeing mean we are on the cusp of a housing bubble. However, in my view, this speculation is a step too far.
There is little hard evidence of either a widespread housing boom or a bubble. True, that in the run up to the launch of the mortgage guarantee element of Help to Buy, new buyer enquiries rose dramatically according to the RICS. But transaction levels and mortgage approvals remain 40 per cent below those in a normal market.
There are some constraints on the market which we believe will keep transaction levels (and prices) in check. If we were to benchmark the market by reference to previous housing market cycles and the regional pattern of current house price growth, we would be in 1996 when the last housing market recovery firmly took hold.
The affordability of mortgage payments has recovered in a similar fashion, albeit at much lower interest rates. These are likely to increase over the period of our forecasts.
However, the average cost of a deposit is much higher relative to income than in 1996, a secondary factor that is likely to cap price growth and continue to restrict accessibility to local homeownership among less affluent households.
The extent to which buyers (and sellers) rush to ride the wave of positive sentiment, depends very much on whether the market acts rationally. The Bank of England and the Government are very much alive to the perils of an overheated market and will no doubt take steps to curtail it if it is deemed to be moving too fast.
Tony Morris-Eyton, Head of office, Savills, Telford
