In the last
few months, the Brighouse (and UK) property market has resisted and flouted
every economist’s prediction. With the economy a shadow of its former self,
unemployment set to hit 11.9%, the Government on track to borrow nearly half a
trillion pounds to pay for Coronavirus support packages etc., all of this has
had no effect on Brighouse homeowner’s enthusiasm or capability to want to move
home. It highlights the influence of both the emotional impact of lockdown and
the enticing appeal of saving thousands of pounds on your Stamp Duty Tax bill.
For the last
few months, the Brighouse property market has been akin to a surfer, riding an
unexpectedly large wave. The question is, will the surfer crash down (i.e. the
property market) onto the rocks or will it calmly arrive at the beach
unscathed? Well looking at house prices firstly…
UK
house prices are 4.7% higher than they were 12 months ago according to the Land
Registry, whilst in Brighouse they are 4.6% higher
Looking at
the data over the country, things overall are looking good for property prices.
Yet it must be remembered the Land Registry data is on completed house sales
and is always a couple of months behind, so this data is for house sales up to
September that were agreed in the spring. Also, it does not take into account
the prices being paid today on Brighouse homes (as they will only show in
statistics the Spring and Summer of 2021 when the sale completes).
Brighouse
house prices will inevitably
ease in 2021
Anecdotal
evidence over the last few months has suggested buyers are using their Stamp Duty
savings on the price they are prepared to pay for the Brighouse home of their
dreams, so when the Stamp Duty holiday finishes in Spring 2021, we will see a
reduction in the price Brighouse properties sell for, as buyers will now have
to hold back some of their cash to pay the Stamp Duty tax.
Mortgage
approvals at a 13 year high
A better
statistic to judge the property market is by the number of mortgage approvals. As
the vast majority of house buyers need a mortgage, that is another good place
to look at the numbers as they are much more up to date than the Land Registry figures.
The Bank of England recently stated 97,500 mortgages were approved last month,
up from the long-term average of just over 65,400 per month. This was the highest
number of mortgage approvals since September 2007, and a whole third higher
than mortgage approvals in February 2020 when we had the Boris Bounce in the
property market.
As a country,
we are due to smash through 2019’s 524,000 total number of mortgage approvals
this month, despite the fact that the property market was closed for nearly
three months in the spring. It’s vital to remember, that mortgage approvals do
not equate to people moving home, as many of you reading this can attest to ...
property sales do fall through.
I do have
apprehensions that many Brighouse people, buying and selling their Brighouse homes
and in a chain, may not be able to realise the move before the Stamp Duty rules
change at the end of March 2021, as there is a massive backlog with mortgage
lenders, local authorities’ and the searches, chartered surveyors surveying the
property and solicitors with the legal work, all combining to slow down the
house selling and buying machine.
If you are in
chain at the moment, you must constantly be talking to all the parties involved
and ensuring everything is focused on getting the sale complete by the end of
March. You have a responsibility to get information requested back in hours,
not weeks ... because if you don’t, you might not get your Brighouse home move
through before the end of the Stamp Duty holiday, and without that discount,
someone in your chain may pull out of the sale altogether and the chain will
break.
The
number of people moving home in Brighouse is anticipated to
drop
sharply after the Stamp Duty holiday ends at the end of March 2021
And that is
probably going to be the biggest impact on the Brighouse property market in
2021. Yes, there will be a slight readjustment in the prices paid after March
2021 (as mentioned above) yet, a reduction in the number of people selling
their Brighouse home does not inevitably lead to a house price crash.
Yes, there will
be a number of people who have to sell in 2021 because they have lost their
jobs (i.e. ‘forced sales’). In the last two ‘Property Market Crashes’ of 1988
and 2008, there were a large number of forced sales in a short period of time (because
business owners had to sell their home as their business had gone bankrupt
because of the Credit Crunch, as well as people who had lost their job),
increasing the supply of properties coming to the market in 1988 and 2008.
This in turn
pushed Brighouse house prices down as the property market was flooded with
lots of property to sell in a short period of time. Yet this time, we have had
the cushion/parachute of Bounce Back Loans, Furlough and Mortgage Holidays over the last 9 months.
Also, another important factor about the last property
market crashes were the levels of interest rates and the amount borrowed.
Interest rates are the key to the
future
of the Brighouse property market
In 1988, mortgage interest rates were an eye watering 11.5%
and 6% in 2008, meaning mortgages were much more expensive compared to the 0.1%
rate we have today. Also, with 77.2% of mortgagees with fixed rate mortgages, and
only 1 in 21 mortgages owing more than 90% of the value of their home (and 1 in
303 mortgagees owing more than 95% of the value of their home), negative equity
should not be so much an issue like it was in 1988.
This means most Brighouse
homeowners are in a much better place to weather the storm of 2021, than they
were in 1988 and 2008
I foresee many
Brighouse sellers will simply wait until activity in the Brighouse
property market picks up again before placing their property on to the market.
This means fewer properties will be placed onto the market for sale in the
later part of 2021, meaning Brighouse house prices will tend to hold up. The
people that will be affected by less properties coming onto the market will be estate
agents, solicitors and home removals people.
I also believe
there will be ‘interesting investment opportunities’ to be had for Brighouse
buy to let in the latter half of 2021 with the potential changes in Capital
Gains Tax regulations, although those won’t go on the open market, so do keep
your ear to the ground and build relationships with all the letting agents in Brighouse
so you get to hear of the property portfolios coming up for sale (as they tend
to sell ‘off market’). Again, if that’s something that interests you – do drop
me a line.
So,
where is the Brighouse property market heading in 2021?
Well,
the Brighouse property market (aka our “surfer”)
has seen house price growth of 28.7% since 2009 … and this has been fuelled on
the back of…
1. Ultra-low
interest rates mean money is cheap to borrow and so mortgage payments are low. With
the Bank of England pumping £150bn into the economy in November with Quantitative
Easing (QE) to add to the £725bn they already spent on QE since 2009 – interest
rates will continue to stay low for some time.
2. There has
been an increase in the demand for housing with annual net migration of 214,400
since 2009 (meaning 96,700 additional households per year have been required
since 2009 just to house those people – a total of 1,063,700 households).
3. The average
age of death has risen by 2.1 years since 2008 in the UK. People living longer,
delays property from being released back onto the property ladder. For every
extra year of life the average Brit lives, an extra 290,850 households are
required in the UK.
None
of these things have changed because of Covid.
As
a country, we have only built on average 165,100 homes a year since 2009.
Supply and demand show that whilst we will probably have a turbulent choppy
ride on the 2021 wave (because of the economy) our surfer (aka the property
market), with long term demand for housing outstripping supply since the
1980’s, will continue to ride the wave (probably not as large as it has been in
2020) as the ultimate long-term outlook for the property market in Brighouse
looks good.
All
this means demand for decent, private rented Brighouse property will be good as
long as the property ticks all the boxes of the tenants. If you are a Brighouse
landlord, whether you are a client of mine or not, feel free to drop me a line
to pick my brain on the future of the buy to let market in Brighouse.
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