Residential property update

02 Jul 20

Since the market was released from lockdown on 13th May, we have been experiencing high volumes of sales and new instructions as our pool of buyers fully engages and sellers enter the market in significant numbers.  Sales are running at – or even above – the same period last year and there are no immediate signs of a slowdown.  The question is how long will it last?

Fenn Wright recently hosted a Virtual Property Conference alongside Ellisons Solicitors and BDO Accountants and the consensus was that the residential market appears remarkably robust.  Here is a brief run through of how we see the market now as we approach, what would have been, the traditional holiday season.

  • Prices are holding up – since 13th May buyers are paying 97.6% of the asking price compared to 96.4% in February.
  • The average asking price in England is £338k, up 2.9% on this time last year and in the East of England, the average asking price is £363k.
  • We experienced record-breaking activity in May and June.  From 13th May to mid-June, we had over 55k visitors to, around double the previous period in April.  On some days we are seeing more than 3500 visitors to our site.

National average asking prices by sector compared to last year (England only, excluding inner London)

  • First time buyers: March 2020: £209,272 – June 2020: £212,528 – up 3.7% on this time last year.
  • Second-steppers: March 2020: £292,995 – June 2020: £297,757 – up 2.7% on this time last year.
  • Top of the ladder: March 2020: £572,773 – June 2020: £591,508 –up 2.4% on this time last year.

Mortgage Lending

We provide assistance with mortgages to our buyers and sellers through our associated advisors at Trentor Bacon and they are reporting a significant retraction of 90% loan to value mortgage products over the past few weeks.  The few lenders who were active at 90% have either restricted access (to first time buyers or existing mortgage customers only) or withdrawn altogether.  Where lenders are bringing new products to the market, they are withdrawn quickly due to high demand.  Until there is a consensus amongst lenders to return to higher LTV lending, it is likely that 85% will remain the maximum for most customers for some time to come.

Help to Buy remains widely available for new-build purchasers where only a 5% personal deposit is required.  The scheme is changing next year, which will restrict access to first time buyers only and introduce regional price caps.

Five-year fixed rates are popular.  One major difference between now and previous years when we experienced difficult market conditions, is that interest rates are very low.  Whilst it remains cheap to borrow, this gives cause to be optimistic about the market moving forwards.  The cost of longer-term fixed rates (5 year fixed) has dropped to the point where there is little difference between those and short-term deals (typically only 0.3% to 0.4%) and 5-year fixed deals are probably the most popular choice currently.

Lenders have become more cautious, especially for those who are self-employed.  Many now ask whether the customer’s business or job has been negatively impacted by Covid-19 and in the case of self-employed borrowers they are asking for bank statements to see how their income has been affected.

Where someone is on furlough, most lenders are taking the reduced income into account but they want confirmation from the employer that the customer has a job to go back to.  Some customers who have taken a payment holiday are now finding their current lender unwilling to assist with any further borrowing or porting of their current mortgage (even though this wasn’t necessarily made clear to them at the time they requested a payment break).  In addition, some lenders are unwilling to use any non-guaranteed income (overtime/bonus etc.) for affordability purposes which is clearly having an impact on how much they can borrow.

Looking ahead, the concern will be how businesses cope once furlough assistance comes to an end and whether we see a significant increase in redundancies.   Money is still very cheap and is likely to remain so for the foreseeable future, this will undoubtedly help.  We just need more lenders to come back into the higher LTV lending to help drive first time buyer activity.

If you would like mortgage advice, Fenn Wright and Trentor Bacon would be happy to assist, just complete the form below and we will be in touch.

What next?

The market is changing and large parts of the Essex and Suffolk residential market are likely to benefit from changing working patterns.

  • In 1999, 10% of full-time workers, worked from home at least once a week.  Now, 15% of full-time workers permanently work from home and 61% will be working from home more often than before.
  • Commuters may no longer need to hop on the train every day of the working week. The ability to work from home and commute once or twice a week will tempt many to move further afield in search of more house for their money.  Gardens are making a comeback in the list of buyers’ priorities as well as garages and access to green spaces or the coast.
  • According to Rightmove, 28% of people who had no plans to move prior to lockdown are now looking to buy, rent or sell.

We started in January with a post Brexit bounce and felt that this was going to be a year where suppressed demand caused by Brexit and the election was released to produce a very busy 2020.  We are still optimistic that there is a chance the bounce will settle into a sustainably active market, at least in terms of following the normal seasonal patterns.

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