Signs of life for the housing market?

Public confidence in the housing market is well and truly off the bottom as propertyfinder.com’s March survey of home buyers and sellers showed confidence in the market back to levels not seen since September 2008, just before Lehmans went spectacularly bust.

A majority of the 2075 respondents to the March poll (61.5%) still believe prices are likely to continue falling, by an average of 3.7% over the coming year, but this is far fewer than the low point in December when 75% predicted further falls in the value of homes.

The pick-up in confidence suggests the number of housing transactions is now likely to recover from its lows. The Land Registry reported just 33,404 transactions in November (latest data available), 59% lower than the previous year and the lowest since records began. There is an 80% correlation between transactions and propertyfinder.com’s confidence monitor, indicating that those seeking to buy or sell a property will now be able to do so more quickly.

Nicholas Leeming, director propertyfinder.com said: “The prospect of higher transaction activity is not only good for the spring home-moving season, it’s crucial for the economy too – much more so than house prices. When homes change hands people use all sorts of services such as removals firms, surveyors and so on, and will spend money on renovations and new consumer goods for their new homes. House prices may yet drift lower, but buyers can take advantage now. A typical buyer offered 9% below the asking price in March, saving them around £15,000 on already lower asking prices.”

Mortgage affordability no longer worries buyers – unemployment is the bugbear

The spectre of unemployment is the single largest factor suppressing confidence in the housing market. 82% of respondents in March said joblessness would cause further falls in prices. A year ago, just 19% of respondents considered higher unemployment would negatively affect the market. That has been rising steadily each quarter to reach its current highs. When the survey began five years ago, just 5% of respondents were worried about jobs. In fact, until very recently, mortgage affordability had dominated househunter concerns. But by March, fewer people were worried about mortgage affordability than at any time since 2004, when base rates were at 3.75% and competition in the market pushed mortgage rates to very low levels.

Nicholas Leeming commented: “We have reached a new phase in the housing market downturn. People are much less worried about affordability now interest rates have fallen. For those with a decent deposit, funding a mortgage is a breeze. But this is not enough to allay concerns over family incomes. Rising unemployment hits homeowners hard and while joblessness continues to rise, we should expect confidence in the market to be subdued.”

Bottom end of housing market showing most interest

The bottom end of the housing market in particular is showing signs of increased activity. There has been a sharp increase in the number of smaller homes coming onto the market. In March, 44% of homes newly on the market had two bedrooms or fewer. This compares to 39% of all homes on the market. This trend is reflected in values. 28% of homes coming onto the market in March were priced less than £125,000 compared to 24% of all homes on the market.

Buyer interest is also focused in this price range. Propertyfinder delivered 58% more leads per property to estate agents from homebuyers looking for homes costing less than £125,000 than for homes above that price.

Nicholas Leeming commented: “First-time buyers who have access to finance are able to find real bargains now. Meanwhile we are seeing more smaller homes come onto the market as amateur landlords seek to exit the buy-to-let market. This is good news for those looking to get their foot on the first rung of the housing ladder.”