Is it a buyers’ market?

There are many who believe the current indicators all point to a market where the buyer has the advantage at the moment.

So do buyers really hold all the cards? With the turbulent Brexit negotiations beginning to take effect, can it really be a buyers’ market now or for much longer?

The number of properties available to buy on estate agents’ books increased marginally from an average of 35 in July, to 37 in August, reports the National Association of Estate Agents (NAEA) Propertymark.

But that was back in the summer months, when people typically hold off putting their house on the market or searching for a new home, and prioritise enjoying a holiday instead.

Yet, in September, the total number of residential property transactions was down, according to HM Revenue & Customs, suggesting the property market is cooling off.

The total number of deals was 100,850 in September - down 1.8 per cent on the previous month.

Increasing choice

But Jeremy Duncombe, director at Legal & General Mortgage Club, thinks the market continues to be an attractive place for buyers and that this is reflected in the strong levels of mortgage lending activity.

“Over the past year and a half, prospective buyers have benefited from new providers coming to market, including specialist lenders that are improving choice for Britain’s growing self-employed workforce. 

“With the base rate remaining at a record low, we’ve also seen thousands of new mortgage products launched that offer highly competitive rates for new buyers and a chance for remortgagers to make a significant saving,” he reasons.

There are clearly areas where buyers are now in the driving seat but to call this a buyers’ market would be to over-generalise a heterogeneous market.James Allen

David Torpey, managing director and chief operating officer at Bluestone Mortgages, observes that those in a strong position to buy are seeing some good deals.

He acknowledges: “This is especially true at the top end of the market, where high levels of stamp duty and a lack of buyers are providing those in a position to purchase top-end properties with good opportunities to negotiate on asking prices.”

There is some regional variation though.

Figure 1: Average house prices by region, August 2017, with monthly and annual % growth

Source: LSL Property Services and Aca

For example, in some of the more expensive parts of London, prices have come off by more than 10 per cent in the past year, points out James Allen, head of Walker Crips Alternative Investments. 

“This has pushed up demand in more affordable districts, causing house price inflation,” he notes.

“Regionally the picture is equally disparate, with parts of the Midlands proving to be property hotspots, but areas a short drive away posting modest falls."

In fact, the figures for September show there is a north-south divide, with northern regions having seen stronger price gains than those in the south.

The September house price index from Your Move shows annual price growth holding steady at 3.3 per cent outside of London and the south east, while in contrast prices fell 0.7 per cent year-on-year in London and edged up by just 1.8 per cent in the south east.

He cautions: “There are clearly areas where buyers are now in the driving seat but to call this a buyers’ market would be to over-generalise a heterogeneous market."

Time on their side

Alex Gosling, chief executive at HouseSimple.com, is also hesitant to call it a buyers’ market.

He says: “With property growth stalling, you would think that buyers hold all the cards at the moment.

“But with a lack of new properties coming onto the market, it’s not a case of too many sellers, not enough buyers.”

In fact, he calls for more of both, noting that people are not rushing to buy a home and that Brexit may well be playing a part in this.

“Buyers are taking their time, viewing multiple properties before making offers,” Mr Gosling observes. “But we’re seeing a lot of the same properties sitting on the market, so buyers don’t have a lot of new properties to choose from.”

And when new properties do come onto the market, buyers are still having to put in offers close to the asking price in order to secure them because sellers are not prepared to negotiate heavily on price, he warns.

It is hard for both buyers and sellers to ignore the looming, yet ever changing, deadline for when Britain eventually leaves the EU.

There are early signs that Brexit and the falling pound is making the property market nervous.

Denting confidence

David Hollingworth, associate director of communications at L&C Mortgages, acknowledges there is potential for the ongoing Brexit negotiations to dent confidence, given the uncertainty that it is likely to generate.  

“That could limit the number of properties coming to market if potential vendors decide to hold fire. Equally it could erode buyer confidence and result in more limited numbers and activity,” he explains. 

What would this mean for buyers?

It's when rates start creeping towards and above 1 per cent that we are likely to see confidence hit.Jonathan Samuels

“A slower market may mean buyers can negotiate a little harder for the right price but with more limited options on the market, realistic vendors should still be able to find buyers,” suggests Mr Hollingworth.

It is not all doom and gloom though, as there will always be those who want to sell up and buy a new property elsewhere.

He confirms: “Homebuyers and movers can’t put their lives on hold indefinitely and the surprisingly strong bounce back in the market in the immediate aftermath of the referendum showed that consumers may be more resilient than anticipated.”

The biggest threat to those looking to buy or sell may in fact be interest rates.

The next Bank of England's Monetary Policy Committee meeting is set for 2 November and the property industry will be keeping a close eye on whether its decides to hike rates.

Jonathan Samuels, chief executive at Octane Capital explains: "It's when rates start creeping towards and above 1 per cent that we are likely to see confidence hit. That's when things start to change and when prices could come under increased pressure"

He believes the property market is still “in a limbo” and expects it to remain there while a number of key political and economic factors play out.

Adds Mr Samuels: “In 2018, the narrative of a sideways-moving market with relatively low transaction levels and buyers in the driving seat is likely to continue.”

eleanor.duncan@ft.com