The current property market
Christopher Buckle gave an instructive snapshot of the housing market with particular regard to London. He explained the short term housing market is governed by sentiment but in the longer term, it is affordability. Nationally, UK house price growth has slowed with price falls most widespread across London. Looking at historical house price growth, peaks were in 1987 and then again in 2002 with the London v rest of UK price ratio being 1.8. In 2014, the price ratio hit 2.2, way ahead of anything seen historically - indicating London is "overpriced" compared to the rest of the U.K.
Prices in Prime London have been falling now since 2014. It is possible Prime London might recover once the outcome of Brexit is known. If sterling drops, Prime London will be an attractive opportunity for international investors.
Turning to affordability, this is constrained by access to mortgage funds. Utilising a ratio of 4 times income, the average buyer in London needs an income of £76,000 to access the market. This probably explains why over the last 3 years, the volume of transactions is down in London by 22%, and is 53% of the 2008 levels.
The future of the property market
Looking to the future, Help to Buy (HTB) has been a major factor in maintaining sales and approximately 50,000 transactions have been funded by this. HTB is being phased out from 2021 to 2023 when it finishes and there is no replacement on the horizon. HTB has accounted for 35% of new home sales.
The other major change in the market is that Buy to Let purchases over the last 3 years are down 50% in London reflecting changes to mortgage interest relief and higher transaction costs, in particular SDLT.
We also learned that planning consents for the supply of new homes are actually currently exceeding the government's own target, but the actual build out of those homes is below. One reason for this may be that much larger sites are being developed, building houses over phases over many years, results in a significant time delay between the planning consent and the actual build.
We are in a situation which is unique historically and there is considerable uncertainty over where the market will go next.