Robin Johnson: Our resilient market needed a break

Robin Johnson: Our resilient market needed a break

Robin Johnson is managing director of Kinleigh, Folkard and Hayward Professional Services

It feels as though we have been writing the same column month in, month out for more than the past year as politicians wrangled over Brexit negotiations and failed to push various versions of the withdrawal agreement through Parliament. No more!! We hope.

Boris Johnson’s victory in December’s General Election marks a crucial line in the sand. Not only will it likely result in the Brexit bill being voted through by the end of January, it has also put a stop to the political purgatory that the country had become used to but exhausted by.

Big businesses, small businesses, the Bank of England, economists across the market and politicians themselves have been bemoaning the damage done by such prolongued uncertainty on the future of the UK.

We may still face big and divisive questions about the medium to long-term future of our nation – the issue of Scottish independence still hangs in the balance – but, finally, we have movement and a significant enough majority in parliament that decisions can be made and executed.

The effect on the pound and trading in the markets was immediate and spelled a very positive response - though this may be short-lived.

Whatever the hue of individuals’ politics, the Conservatives’ resounding majority win has also provided a boon to homeowners and those looking to move in particular.

While the housing market has not been all doom and gloom and house prices are really either rising or pretty static rather than down in nearly all parts of the country, there is no doubt that the uncertainty emanating from the ongoing failure to agree an exit plan from the EU and get parliamentary approval for it was stymying activity in the market.

That immediate threat to confidence is gone and with the new year comes a renewed sense of hope for the housing market.

Those who have held off moving due to worry about Brexit are likely to put their homes on the market in early January, traditionally a time when stock levels improve.

Stamp duty remains one of those sticking points for those already on the ladder and looking to move up, however, the signs for first-time buyer activity are good.

The Mortgage Lenders and Administrators Statistics from the Bank of England published in December revealed that the share of high LTV lending rose again in Q3 2019 – for a seventh consecutive quarter.

Loans with an LTV of above 90% made up 6.7% of all new mortgage advances, the highest reading since 2008.

That rise reflects the fall in high LTV loan pricing, with the spread between the average quoted rate on a two-year 75% and 95% LTV fixed rate loan falling by 80% over the past 24 months. Despite the uncertainty that characterised 2019, activity in the last quarter was up on previous years and buyer registrations are up.

This activity will feed through into the market in the first quarter and we expect there to be a second quarter bounce spurred by improved confidence following the election result.

The Royal Institute of Chartered Surveyors published figures the day voters went to the polls, revealing that sales expectations over the next three months were already looking more stable (net balance +11% from 5%), as well as the 12 month outlook seeing the most positive sentiment since February 2017, with +35% net balance.

Looking at regions individually, a solid increase in transactions over the next 12 months is expected across virtually all areas covered by this survey.

Prices are also expected to pick up over the next 12 months on a headline level, with 33% more respondents in the November survey anticipating house prices will rise (rather than fall) over the next 12 months.

Significantly, prices are expected to return to growth across all areas of the UK with Wales and Northern Ireland leading the way.

People do not put life on hold forever. Jobs, babies, divorces, deaths – none of these life events waits for politics. They are also the most common triggers for moving home, be that as a purchaser or a renter.

While the much-needed political stability that December’s election result brings is very welcome indeed, we remain of the view that there is a growing recognition that this is the beginning of a long journey politically that will be the backdrop to our lives for more years to come.

That said, with a majority now secure in Parliament for the next few years at least, it’s likely that life will go on rather more as usual than has been the case for the past two years.

That is very good news for homeowners, first-time buyers, brokers and all those in the property chain.