is seasonality returning to the housing market?
As the schools break up and thoughts turn to summer holidays, traditionally this time of year tends to be quieter for the housing market. Buyers and sellers put their searches and sales on hold as they head off on holiday, picking up again in September once the children are back at school. The pandemic and subsequent stamp duty holiday have changed things with the past couple of years not really witnessing the traditional seasonality of the market – it’s simply been busy all way through the year. But are we starting to see a return of the seasons?
Anecdotally, estate agents seem to think so, with many reporting a quieter July, a trend which is expected to continue in August. With significant time lags when it comes to most house price indices, there is no proof to be found there just yet, although some are starting to indicate signs of a slowdown.
Not the Land Registry though, which is one of the most historic surveys, reporting last week that prices continued to rise in May, with London house prices hitting a new record high. Given the low number of properties coming to market with buyers continuing to compete for limited stock, this is a trend we have seen for some time. The average cost of a home in the capital is now £526,183, up 8.2 per cent in a year and 0.2 per cent over the month – making life even more difficult for first-time buyers and second steppers trying to move up the ladder. However, it wasn’t all about never-ending rises; while detached homes rose by 11.1 per cent in the capital, this was a slight dip on the 12.4 per cent increase seen in April.
The following day, HMRC did report a dramatic fall in transactional activity in June compared with the same period last year, with transactions down 55 per cent from 214,530 to 96,290. This was mostly down to heightened activity in the market in 2021 when the stamp duty holiday was about to expire (before it was tapered until the end of September 2021). Yet this was not the only reason – the subdued numbers this year reflect broader uncertainty in the economy as the cost-of-living crisis really begins to bite.
This is reinforced by the Bank of England Money and Credit data out this week which reveals that mortgage approvals for new purchases, an indicator of future borrowing and therefore activity, decreased to 63,700 in June from 65,700 in May, below the 12-month pre-pandemic average of up to February 2020 of 66,700. Meanwhile, consumer credit borrowing rose in June, as higher inflation and living costs mean many will have to dip into savings in order to cover rising bills, while those who don’t have that buffer will find things increasingly difficult.
Despite five interest rate rises since December and with another likely in August to throw into the mix, the housing market has shown remarkable resilience. House price growth is inevitably starting to slow as supply levels slowly improve. Buyers are keen to move quickly to secure a mortgage rate before they rise further, perhaps realising that this will be their best opportunity in a while to get on the housing ladder. Rising costs will put a squeeze on buyers at some point but we won’t know for a couple of months, when the house price indices covering the summer are released, whether seasonality is officially returning to the market. Early indications are this is indeed the case.
how MT Finance can help
Should business pick up again in the autumn as fresh stock comes to market and buyers resume their searches after the summer, short-term finance may provide the answer for those – particularly landlords and investors – who need to move quickly to beat stiff competition for property and who can’t wait for a standard mortgage application to be approved. A bridging loan is fast and flexible, with MT Finance making the whole process as stress-free as possible.