Chancellor Philip Hammond announced in the budget on 22nd November that stamp duty would be abolished immediately for first-time buyers buying a home up to £300,000. For properties costing up to £500,000, no stamp duty will be payable on the first £300,000.
In the opinion of H Tiddy, this will help stimulate the housing market, but not necessarily in the way the chancellor is expecting. H Tiddy believe that the stamp duty change will be welcomed by first time buyers and will help stimulate further growth in the housing market. However, the greater hurdles for first time buyers are saving for a deposit as well as finding their first home at a price that meets current lending criteria and income multiples offered by the mortgage lenders. For many years now, it has been the Buy to Let investment buyer that has kick started the ‘chain process’. This has boosted average house prices in many areas of the UK over and above affordable levels for first time buyer. A Buy to Let mortgage is where an investor borrows money to purchase a property in order to let it out to tenants. Lenders calculate how much they are willing to lend using a different formula by looking at expected monthly rental income (compared to the specific income of the individual) of the property being purchased to determine the maximum loan available.
Mark Willson, Director at H Tiddy said: “ when I first started out in the business of selling property in Cornwall in the mid 1980’s, average house prices were directed mainly by the first time buyer market. There has to be a buyer who does not have a property to sell to start a property chain off. Local average wages and building society lending criteria, along with interest rate levels, would effectively set the price of properties in streets that were sold to first time buyers. If interest or wage rates, or lending criteria altered, this had a direct correlation on house prices. Buy to Let mortgages became mainstream lending for most banks in the mid to late 1990’s. This changed the way the housing market operated, where historical first time buyer properties were sold to Buy to Let investor buyers who could afford to pay a higher price due to increasing private rental yields and an easier ability to raise the cash deposit, which is still the main struggle for the modern first time buyer of today.”
Mark reported: “the first time buyer property market over the last decade or so has been caught in a virtuous circle due to a shortage of housing. Those who wish to get on the housing ladder and are living in rented accommodation are forced to pay high rents due to the buoyant private rental sector. This has an impact on their disposable income and the amount of money per calendar month they can afford to save towards their deposit. Even though the government’s Help to Buy Schemes have gone some way to break the cycle, in my opinion, this has mainly had an impact on the sale of new homes as opposed to second hand sales. Therefore, those looking at buying their first home are, effectively, fuelling and strengthening the Buy to Let market. The cycle is usually only broken by way of the cash deposit being funded via the help of the bank of ‘mum and dad’.”
The Office for Budget Responsibility (OBR) immediately reported after the budget announcement on Stamp Duty that the main beneficiaries would be existing homeowners and it expects UK house prices to rise by 0.3% within a year as a result of the change. The Halifax reported: “for all first-time buyers, the deposit is a bigger up-front cost than Stamp Duty. The average deposit across the UK is £32,899 compared to the average Stamp Duty charge of £1,654”.
The Bank of England base rate increased to 0.5% on 2nd November. The Governor, Mark Carney, suggested two further rises each of 0.25% will follow in the next three years. H Tiddy think that the rise in base rate to 1% in total is unlikely to have any major impact.
Mark Willson commented: “I am sure there are many of us that remember base rates rising rapidly to very painful levels culminating in an all time high of 15% in October 1989. This had a major impact on those who had taken out 100% or higher mortgages on excessive income multiples. This resulted in ‘negative equity’ and repossessions, especially in the early 1990’s. In those days, the estate agent had the unfortunate task of representing the lender and partnering the bailiff, armed with a court order, to repossess a property on behalf of the building society. In February 1991, I was working in a Cornish town and remember attending 30 repossessions that month, ie more than one a day.”
Mark went on to say: “the result was a very strong buyers market causing a dramatic downturn in house prices, in some cases as much as 10% a month. I have a wry smile when a news announcement reports house prices are dropping, the market is going in to slow down and then compares the situation to the early 1990’s. Firstly, a drop in ‘house price growth’ is not the same as ‘house prices are falling’. Secondly, the modern market place in the UK has a very different dynamic now where lessons have been learnt from the late 1980’s and the banking crisis around 10 years ago. Bank lending criteria is more stringent and the global economy relies on much lower interest rates. A 0.75% rise in interest rates should be within the realms of affordability for home owners and future buyers and in many areas of the UK, a much cheaper monthly cost than renting.”
The Halifax and the Nationwide have recently reported yearly house price growth for the UK at 4.5% and 2.5% respectively. Russell Galley, Managing Director, Halifax Community Bank, said: “The average UK house price is now £225,826 – exceeding last month’s previous high. The fact that the supply of new homes and existing properties available for sale remains low, combined with low mortgage and a high employment rates, continues to support house prices and is likely to do so over the coming months. We do not anticipate the Base Rate rise will be a barrier to buying a house.”
The message from H Tiddy to all buyers looking to purchase now or in 2018 is: “to remain confident. ” Mark Willson commented by way of a “tortoise and hare” analogy, where the Cornwall housing market is the tortoise compared to London’s market as the hare. He predicts that property prices in Cornwall will remain relatively stable. House price growth may soften a little until we know where we are with Europe, but purchase prices will not drop. He said: “London has shown considerably greater house price growth than the rest of the country for the majority of the past decade. It is only natural that London should be going though a period of negative pricing re-adjustment where the ‘peak and trough” cycle is far more severe. For the last 7 to 8 years we at H Tiddy have been reporting stable house price growth of around 3 to 4% per annum compared to London at 10 to 15%. This ‘inflationary’ growth is not noticeable over one or two years, but it does become noticeable if 3 or 4% is compounded over 5 years or more. Therefore, the gap is narrowing. So, watch out London, Cornwall is catching you up!”
The Royal Institiute of Charterted Surveyors (RICS) has been consistently reporting worries over estate agents’ low stock levels. “Following a couple of months in which new instructions had held broadly stable, the latest results point to a renewed deterioration in the flow of fresh listings coming to market (the net balance being -14%)”.
Jack Hunkin, Valuer and Negotiator for H Tiddy said: “For those buyers who are not registered on our database, please contact us immediately. Not all the properties we sell see the open market. Do not rely on Rightmove or Zoopla website alerts. Register with us today. This will give you exclusivity and notifications on all the properties on the market with us.” Jack went on to say: “ our message to anyone considering moving is: ‘now is a good time to sell’. There are not enough properties coming on the market to meet demand.”
With the costs of Stamp Duty, (particularly with the extra 3% for second home or investment buyers), economic uncertainty, rising inflation, Brexit negotiations and faltering GDP National Growth are valid reasons enough as to why some potential sellers and buyers remain cautious. However, one of the main reasons why H Tiddy remain successful is by understanding these worries due to their number of years experience in coping with the bad times and as well as the good. They have been established for over 100 years. They informed us that they believe that the current housing market is neither a sellers or buyers market, in other words, a stable market. However, they report that it is price sensitive. Their advice to anyone thinking of selling is a good estate agent will help you set the right price, market your home professionally, and expertly negotiate and monitor your sale via solicitors to a successful exchange of contracts. Setting the right price is a key factor. A professional agent will have a strong number of comparable properties that they have sold. They will have knowledge of the local area and understand the needs and wants of their buyers. H Tiddy advise not to get caught in the trap of choosing an agent who over values and offers you excessively low fees to secure your business. One of the biggest gripes customers have about Estate Agents are the “over promises” made usually at the initial meeting, market appraisal and valuation stage. An agent who has the largest market share and who has a strong track record of selling properties in a price bracket similar to your home is the agent for you.
H Tiddy believe in actions speaking much louder than words. For instance, they are celebrating an exceptional achievement in selling more properties so far in 2017 than they did in their best trading year ever being last year in 2016, and previously 2007. Natalie Andrew, Administration Manager and Negotiator at H Tiddy said: “this accolade is even more outstanding by the fact there is still another month left in the year.”
Pictured is just a selection of properties H Tiddy has sold this year. The company has had activity in all price ranges, highlighted by the broad range of properties they have successfully sold from £29,000 to over £2.5 million, covering the area from Falmouth over The Roseland to Gorran Haven. Gail Chenoweth, Negotiator for H Tiddy, reported: “ we have sold a number of properties this year to lifestyle change buyers who have made the permanent move to our beautiful area. With Cornwall Airport at Newquay currently being the UK’s fastest expanding airport as well as the improved A30 road links, commuting to the rest of the UK has never been better.”
Believe it or not, but, over the last two years, H Tiddy have sale agreed as many properties during the winter as they have done in July and August. If you want to take advantage of their busy winter and spring market, contact Mark, Natalie, Gail or Jack NOW on 01326 270212 to discuss possible sales, updated valuations, arrange a market appraisal, or any other aspect of the housing market.