It is an interesting period for the property market with ongoing average house prices continuing to rise across the county with the Nationwide reporting UK annual price growth increased to 5.7% in March. So good news for most house sellers, however, the push for completions ahead of today’s change to stamp duty on second homes will have distorted the market to some extent and so growth is likely to calm in the next quarter. Nevertheless, low borrowing rates, strong levels of employment and still a limit to new instructions will keep pressure on asking prices.
Of course we also have the interesting proposition of the country going to the polls in June to decide whether or not to leave the EU. Markets do not like uncertainty but how the looming vote is effecting the average persons buying decision is uncertain. As with the approach to the General Election we are likely to see a quieter period closer to the vote and Britain makes up its mind.
Commenting Robert Gardner, Nationwide’s Chief Economist, said: “Regional house prices maintained the same broad trends prevailing in recent years with southern regions continuing to record significantly stronger rates of annual price growth, further widening regional disparities.
One slight variation on this familiar theme was that, for only the fourth time in five years, London did not record the strongest rate of price growth, with the Outer Metropolitan region occupying the top spot in Q1. Nevertheless, London still recorded the second fastest rate of growth, with prices reaching a new all-time high some 52% above pre-crisis levels (compared with 9% for overall UK house prices).
Overall, the pace of house price growth generally moderates as you move from the south to the north of the country, with the North of England and Scotland actually recording modest house price declines in Q1, even though prices remain well below pre-crisis levels in those regions.” You can read the full Nationwide report here.
So should we be concerned about continued increases in house prices? On the one hand even a modest increase on asking prices will, by the time an average small property development is constructed, provide an improved margin. However, the counter effect will be to make affordability of property ever more difficult for first-time buyers and those attempting to move up the ladder requiring a mortgage of anything up to six times income.
In the Halifax House Price Index report (March) Martin Ellis, Halifax housing economist, said: ““Prices continue to rise at a robust pace driven by a significant imbalance between supply and demand. Whilst this position is likely to continue over the coming months, there are some tentative signs that the supply situation may be beginning to improve. Instructions for secondhand properties coming up for sale have increased in the past two months and the level of house building increased significantly in 2015. Further ahead, increasing affordability issues, as house price increases continue to exceed wage growth, are likely to curb housing demand and cause price growth to ease.”
The property market is also ever more competitive for developers with high levels of competition for sites and this has been reflected in the number of enquiries we have been receiving for both mezzanine funding and our stretch products. With both mezzanine funding and stretch funding a developer has the additional financial support from Saxon Trust (perviously Calmez Ltd) to target either additional projects or opportunities that would otherwise be out of financial reach.
Consequently, this has been a busy quarter for completions and one example in Rochester has been attracting a great deal of interest with now 7 units out of 14 reserved off plan. With completion of phase II not due until October, this is a great endorsement of an exciting project in a great location. Saxon Trust as provided development stretch funding of £895,000 for phase II on a fixed term of 12 months.