Market Update

As we enter the summer months, the local property market remains strong with the demand for purchasing continuing to outstrip the supply of properties for sale.

Bank of England Governor Mark Carney warned recently that the strong housing market represents the "biggest risk" to the economic recovery and that with approvals for large mortgages on the increase, he expressed concern about the dangers of another "big debt overhang" building up.

He added that the Bank of England was monitoring the situation closely.

He did however say that there was little the Bank could do about the "deep, deep structural problems" in the housing market, with demand for homes outstripping supply.

My own view is that we may see a little cooling of the market in the coming months even if interest rates stay at historic lows. With a General Election due by May 2015 and following the recent local and European election results, there is bound to be an increase in uncertainty and this may dampen down decision making.

Fundamentally however the sales market is strong and prices look set to continue to grow, albeit possibly at a lower rate than in recent months.

The lettings market has dominated the political headlines with labour stating that they wish to scrap fees charged to tenants and to create longer tenancies. A recent vote on the issue of tenant fees in Parliament was defeated but Labour are insisting it will form part of their manifesto at the General Election.

To me this is all about political posturing and shows a distinct lack of understanding of the market and, any decision to scrap tenant fees or increase tenancy lengths, could actually have an adverse effect on the flexibility of the market and the supply of available properties.

Fees to tenants incorporate many aspects of setting up a tenancy including referencing and deposit registration. These are designed to help protect the interests of both landlord and tenant and will not go away. If they are not payable by the tenant, then they will be payable by the landlord who will, undoubtedly look to recover through a higher rental payment.

The issue of longer tenancies is also something of a red herring. The majority of tenancies now last over two years but based on extending an initial one year contract. Most tenancies are set up on an Assured Shorthold Tenancy basis which would not allow for three year agreements which would need to be set up under deed. This is unnecessary and more complicated.

Most landlords own their properties with the help of buy to let mortgages. Buy to let lenders will not currently lend on properties with long tenancies in place and therefore labour’s proposals could see landlords unable to finance the purchase of property to rent thus reducing the supply of rental property in the market with the consequence that rents would invariably increase due to supply failing to meet demand. A vicious circle that Labour’s proposals seem to fail to address.

As we enter June, those of us who are English are stealing ourselves for the World Cup in Brazil. Expectations for England are not all that high and so perhaps, just perhaps, they can surprise everyone and do much better than anticipated. I wouldn’t bet my house on it but I am hoping England can put on a good show and lift the trophy!

Finally, with a fast moving market and the impact of changes in mortgages following the mortgage market review, it is vital that anyone considering buying or selling, takes professional advice and puts themselves in the strongest position possible to achieve their aims.

The team and myself have many years of experience and will be only too pleased to discuss your situation and requirements in complete confidence.

Yours

Peter Lawrence