UK housing market down and staying there

Aug 12 | 2019

Mark Haywood from the UK’s National Association of Estate Agents (NAEA) addressed the BAR conference (British Association of Removers) in May with a fairly stark appraisal of the UK housing market.

Mark Hayward, NAEAHe said that the market was still suffering from the uncertainty caused by Brexit and the total number of sales annually was running at around 900,000, two-thirds of the pre-recession volume.  Interestingly, and rather depressingly, Mark does not see the figures returning to the higher level in the foreseeable future.

Mark said that the reduction in sales was caused by a number of factors.  Negative equity had left some people as ‘Mortgage Prisoners’ who were left unable to move; buy-to-let sales were down owing to the change in tax relief for landlords; there was an increased number of ‘Bedroom Blockers’: an increase in equity release that allows people to stay in their homes until they die; and people over 65 still living in a family house that is too big for their needs and preventing a younger family moving in. In all, there are now 30% fewer transactions than pre-recession.

Most importantly perhaps, there has been a change in culture in which people are buying their first home later in life and looking at it as a home not an investment.  All these factors have combined to reduce the frequency of people moving home from seven years (the accepted standard) to 23 years. The problem is made worse because of the antiquated legal system surrounding house sales in England which had dragged the average time from seeing a house to completion out to 19 weeks. The practice of leaving virtually no time between the exchange of contracts and completion has also added to the uncertainty and anxiety surrounding moving house.  The UK government has set up working groups to work out what to do about the problem, but parliamentary time has been blocked by Brexit.

Mark said that there is an imbalance of supply and demand with agents not having enough houses to sell.  At the same time buyers are taking longer to decide with on average 20 viewings per sale, up from eight in the past.

To combat this the UK is planning to trial an idea that will see a ‘Reservation Agreement’ between buyer and seller in which neither can withdraw from an agreement without good cause. However, there might be unintended consequences with this as sellers might be more reluctant to put houses on the market reducing the pool of available properties still further.

That said, looking at the NAEA website now, Mark seems to think the problem has eased a little.  “It is encouraging to see the housing market bouncing back, with supply and demand rising to the highest levels seen since last year,” he said.  “It’s evident that buyers and sellers are no longer waiting for the outcome of Brexit and want to get things moving, particularly as many sellers are realising that it’s a buyers’ market in certain areas of the country. More than eight in 10 (81%) properties sold for less than the original asking price in May, which shows that estate agents, with buyers and sellers, are successfully negotiating a property sale, with them coming to an agreement on the value of the home.”

Summing up, however, Mark said that the UK housing market is remarkably resilient and that people will continue to move “because they have to”.

Photo:  Mark Haywood, NAEA