Splashing the Cash
A Late Rally
Transactions have been sluggish for most of the year but this looks set to change.
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The latest figures from HMRC show that the number of housing transactions fell by two per cent in the last year, but the outlook is starting to look better with UK sales in the last month up by three per cent. And it looks like they may get better still.
Mortgage approvals for house purchases picked up by three per cent during August – making that the third consecutive month of growth. That bodes well for growth in transactions in the short term as the number of mortgage approvals tend to feed into transactions about two months later.
And there’s more good news ahead. Data from the Royal Institution of Chartered Surveyors shows that the ratio of sales to stock has been on the increase, highlighting that demand for property is outpacing supply. This is also a good indicator of the future path of transactions – five months down the line. Looking at this data suggests that transactions should continue to rise, but may stabilise towards the beginning of the New Year.
The boost in mortgage approvals could be due to the costs of higher LTV loans now starting to fall, making it easier for people with smaller deposits to get into the housing market for the first time, and for existing owners with reduced equity to move on. The timing also fits with improvements in the economy, such as rising average earnings and low unemployment which may have also helped boost confidence and security.
Although we expect the number of transactions to improve, we shouldn’t get carried away.There are still a number of hurdles such as the tighter regulations on credit which have made mortgages less accessible; the issue of affordability, particularly in London and the South; and also the likelihood of interest rates rising next year. But overall, the story for transactions looks positive, if a little uncertain.
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