In recent
articles on the Neath property market, I have been talking a lot about house
prices over the last 12 months and 5 years in Neath.
When it comes
to newspapers talking about the property market, the headline most people look
at is what is happening to house prices.
However, as 2
in 3 (65.1%) of Neath home sellers are also home buyers, the price is almost
irrelevant. Let me explain.
If your
property has gone down in value – the one you want to buy has also gone down in
value – so you are no better or worse off (and if you are moving up market –
which most people do when they move home – in a suppressed property market the
gap between what yours is worth and what you will buy gets lower … meaning you
will be better off).
Many property
commentators (including myself) consider a better measure of the health of the
property market is the transaction numbers (i.e. the number of people selling
and buying).
Let’s take a
look at the numbers for Neath Port Talbot as a whole.
The average
number of properties sold in Q1 (Jan/Feb/March) between 2008 and 2020 was 114
properties per month, whilst Q1 in 2021 saw 158 properties sell on average per
month (boosted by the March stats where an eye watering 204 homes sold). This
meant…
38.2% more houses
sold in the Neath area in Q1 2021 than the 14-year average
The average
number properties in Q2 (April/May/June) between 2008 and 2020 was 134
properties per month, whilst Q2 in 2021 saw only 121 properties sell on average
per month, meaning…
9.4% less houses sold
in the Neath area in Q2 2021 than the 14-year average
Finally,
whilst the Land Registry won’t be publishing the exact stats for Q3 2021 for
our local authority for a couple of months, I can make certain calculated
assumptions from the national data published by HMRC. The number of property
sales for our local authority area in Q3 (July/August/September) between 2008
and 2020 was on average 139 properties per month. However, using the HMRC data,
I calculate there will only be 109 properties sold on average per month in Q3
2021. This means…
21.9% less houses
sold in the Neath area in Q3 2021 than the 14-year average
One of the
two main drivers of activity in the housing market in the latter half of 2020
(meaning Q1 figures were better than the long-term average) was the battle for
space, with many Neath buyers seeking larger properties to work from home. The
second was the short-lived tax relief measures such as the cut to Land
Transaction Tax meaning property prices were at an all-time high.
But what also
might surprise you is the number of people buying for the first time.
1 in 4 mortgages
since lockdown have been for first-time buyers (25.12%)
Neath
first-time buyers, buoyed by parental help with their deposits, the Government’s
5% deposit mortgage and ultra-low borrowing costs, have also helped to push
house price growth since the start of 2021. In fact, if you split down house
price growth between second-time (third-time, etc.,) buyers and first-time
buyers, the national annual house price inflation for first-time buyers is 9.2%
compared to 8.1% for the second or third buyers.
Yet, the Q2 and Q3
2021 Neath property market was worse than the long-term Neath average (in terms
of property transactions)
The question
is – should we be worried?
The UK
economy continues to deliver a benevolent framework to the British housing
market.
The labour
market has outstripped expectations with the millions expected to join the dole
queue at the end of furlough failing to materialise and with the number of job
vacancies on the rise.
Of course
(and I mentioned a lot in my recent posts), the Bank of England is projected to
increase interest rates to dampen inflation in the coming months, with further
small rises predicted over 2022, so I do expect the demand for property to cool
off as mortgage borrowing costs increase.
Normally such
rises in mortgage costs would mean less property would sell, yet nothing over
the last couple of years has been normal.
Many Neath
property homeowners have held back putting their property on the market in the
last 6 months because they were afraid they would sell their own home but not
find another to buy – thus making them homeless (nothing could be further from
the truth – yet that is what a lot of people incorrectly believe).
If the Neath property
market slows and interest rates rise, mortgage costs will still be very low by
historical standards.
Also, if the
obstacle of raising the 5% deposit can be overcome by first-time buyers plus a
confidence that existing homeowners won’t be made homeless because of a cooling
property market, many more people could be tempted to enter the property market
by placing their property for sale first…
… thus,
opening up the market to more buyers – which in turn will drive up transaction
numbers back to their normal 14-year average. However, raising a deposit is
likely to remain the primary obstacle for many.
If you are a Neath
homeowner or Neath first-time buyer and want my thoughts on the future, then
please do drop me a line.
2022 is going
to be an interesting year ahead for the Neath property market – only time will
tell if this will be a brief respite or is it running out of steam?
Please tell me your thoughts on what you think will happen.
