Is this the first sign of a bounce in the housing market? Property website Rightmove is reporting this morning that enquiries to estate agents so far this month are 19 per cent on August last year. This follows a quarter-point cut in interest rates by the Bank of England (BoE).
Rightmove’s data is forward-looking, in that it represents the first step in the house-buying process: contacting an estate agent for information, or for a viewing. Then again, enquiries are only enquiries – it is a big step from there to securing a mortgage and making an offer, and an even bigger step actually to completing a purchase. The government’s data for completed sales tells a rather different story. In June, there were 91,370 completions, up 8 per cent on June 2023 but representing a modest fall on May 2023 – indeed, it was the first fall in seasonally adjusted sales since last autumn. The bigger picture is that housing transactions are bumbling along at levels significantly lower than before the pandemic. We then had a bizarre Covid house price boom as buyers took advantage of a stamp duty holiday. But since that fell away towards the end of 2021, volumes of sales have never recovered.
There is a problem now in converting estate agents’ inquiries into hard sales: growing numbers of properties are becoming blighted for various reasons. A surge in service charges and the scandal of doubling ground rents has led to growing buyer awareness of the iniquities of the leasehold system. The previous government did promise to reform it, at one point promising to reduce all ground rents to zero as well as introducing greater powers for leaseholders to challenge service charges, but first, the proposals were watered down after lobbying by freeholder interests, and then the election intervened. We have yet to see what Labour will come up with – its manifesto promised to ‘bring the feudal leasehold system to an end’, but while it said new leaseholds would be banned, and commonhold would become the default tenure, it lacked details on what it would mean for existing leaseholds. A comprehensive set of reforms which really did allow existing leaseholders to escape from exploitation by rapacious freeholders and managing agents would allow a bounce in sales.
There is also the cladding scandal, that has blighted many fairly newly built blocks of flats. Then there are Energy Performance Certificate (EPC) ratings. It is becoming increasingly difficult to own a property with a rating below ‘C’. While the previous government did water down proposals to ban the letting out of properties with a ‘D’ rating or below, they are likely to be reintroduced under the present government. Meanwhile, mortgage lenders are becoming twitchy about lending on homes with the lower grades. Even though EPCs have been roundly criticised, with many complaining about perverse ratings brought about by guesswork (I have seen two flats in the same building, one with a B rating, one with a D, the difference explained by one surveyor assuming that there was solid wall insulation and the other assuming there wasn’t any), their influence on the house-buying process is becoming more and more ingrained.
On top of this, there is the doubling of council tax on second homes, which is affecting the housing market in popular areas. All in all, we are heading for a housing market in which properties free of any of these forms of blight will sell quickly – while others languish on the market. It may be a long time before house sales pick up to pre-pandemic levels.
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