If there’s one word that sums up the UK housing market over the past five years, surely disruption could be a clear front runner.
During this period, those operating across the residential sector have had to get to grips with the impact that tax changes and Brexit have had – and the uncertain market that’s resulted. But amid the sensitive and challenging environment, recently there have been some encouraging signs and positive activity to take note of, not only in the auction room but across the Savills residential agency business and wider market.
That’s not to say we’re sensing an imminent bounce back to pre-GFC peak activity levels, but momentum seems to be building, and perhaps there’s a glimmer of light at the end of the tunnel once the haze of uncertainty lifts.
There’s no doubt for the auctions sector that the past couple of years have been marked by industry headwinds, and the market has had to adjust accordingly. We’ve seen investors ease back, or at least be a little more cautious in what they’ll transact on and where.
Positive changes
We’re operating in different times now, and that’s reflected in the success rates and totals raised across the board, which have come down since 2015 when 80% and 90% successes were generally the norm. But in reviewing our last couple of sales, we have picked up on some positive changes in sentiment and activity. In May we recorded our best results in 12 months – we raised more than we have for some time, and the room itself was at capacity.
If some bidders are sitting on their hands, they are definitely back in the room doing their homework. It seems as though our continued dialogue with sellers on pricing appears to have properly come into play, and that the gap between buyer and seller has narrowed, which in turn means deals can happen.
And we’re not alone, with EIG reporting that both the number of lots sold and the amount raised at auction in May were up significantly on last year. Given that the auctions sector is often cited as being the most up-to-date snapshot of what’s happening in the housing market, this latest account of our trading floor is telling.
Looking to the prime residential market, our researchers note that appropriately priced, good stock has continued to trade, but what it has required is great pragmatism from buyers and sellers. And seemingly, there’s a shared thread with the auctions market too, with similar narrowing of the gap between the price expectations of those in the market.
More generally across our residential agency business, agents have highlighted the sizeable, growing pool of demand developing among buyers – a theme that’s reflected in the May RICS survey, in which more surveyors reported rising new enquiries and instructions for the second month on the trot, albeit they remain a minority.
Growing demand
But it remains a fragile market, and many are putting buying and selling decisions on hold until the outcome of Brexit negotiations become clearer. Yet demand appears to be building, and once that time comes it’s expected to lead to an uptick in transactions.
May also saw reports of a notable rise in new mortgage approvals – a marked shift given that the seasonally adjusted numbers had been largely flat for 18 months. Time will tell whether this forms part of an ongoing trend or if it’s an isolated period, but what can be inferred is that the mortgage market is continuing at its regular pace and hasn’t been affected by the political landscape in the way that sentiment and transactions have.
All these indicators combined, plus the suggestion that the market could be at or close to bottom and that prices are beginning to stabilise, would suggest that the signals are there and things could begin to move forwards once there’s clarity.
But that’s the key phrase, clarity – and it’s not until then that we’d expect the market to resume to more normal trading conditions.
Chris Coleman-Smith is director of national auctions at Savills
