The RICS monthly survey that’s just been released reports that fewer properties were listed for sale in February than the month before. The main reason is cited as sellers waiting to determine whether the Stamp Duty Holiday was to be extended.

52% of surveyors and estate agents reported an increase in house prices in February. That’s up from 49% in January. This is indicative of house price inflation maintaining momentum. 46% of the respondents forecast prices will continue to rise across the year, up from 30% in January. Demand for property continues, and with an ongoing shortage of supply it is inevitable house prices will continue to rise.

These statistics are against a background of one of the worst mortgage droughts on record, especially for first time buyers.

Following the banking collapse in 2008, lending by institutions contracted more than I’d ever seen in my 41 years in this industry. Mortgage supply began to improve in 2011 and 2012, but lending criteria was so tight many would-be home owners didn’t qualify for a mortgage.

As interest rates settled at an all-time low, loans of less than 80% loan to valuation became very affordable to many and we saw the housing market regain momentum from 2013 onwards. But for first time buyers, saving a 20%+ deposit was very hard, especially when many first time buyers are living in (relatively) expensive rented accommodation. Nonetheless, with a supply of property below the level of demand, house prices continued to rise.

Competition between lenders saw the introduction of longer-term loans to make mortgage repayments more affordable (there are now 40 year mortgages rather than the maximum 25 year terms when I started as an Office Junior in Bramley in 1979) and some lenders introduced 90% loan to value mortgages. This opened-up the market to even more buyers, without any significant increase in the housing supply. Prices continued to rise.

In the past two or three years we’ve seen an increase in house building, boosted by the Government’s Help to Buy Scheme. This has improved the housing supply, but by no means at a level that balances our growth in population and especially the increase in demand for home ownership – a trait that has been endemic in Britain since the 1950’s, unlike many European countries where renting is extremely common.

The pandemic has not changed our population’s appetite for home ownership. It may well have ripped-apart the financial ability of some to achieve this goal, yet others (as we are seeing day-to-day with demand on our services) have been financially unaffected by the virus. It is obvious from our due diligence checks when offers are made that some buyers have found themselves financially better-off during the last year, as a consequence of their secure employment or successful business ventures.

We are now to see the introduction of 95% mortgages, as announced in the recent budget. The lender’s risk of higher loan-to-value mortgages is going being mitigated by a Government guarantee. This will open the market up to yet another ‘tranche’ of aspiring home owners. I anticipate our database of waiting buyers will increase by another 20% in the next 3-months, as we find out what the details are of these new 5% deposit loans.

If we see less than a 5% increase in house prices this year, I will be very surprised. For most areas in which my team operate in central and north-west Leeds, house prices last year rose by 7% (I accept that as a single office practice my data samples are small compared to some of the larger agencies). For 9-months of last year we operated during a pandemic. If house prices can escalate so rapidly during a year of ‘lockdowns’, furloughed employees, many self-employed with no income and maximum 90% mortgages, should we not expect at least the same increase on last years results in the next 12 months, with restrictions easing and mortgage finance is even more readily available?

I am not championing the fact that house prices are rising – estate agents make far more money when we have lots of stock to sell (volume turnover) rather than a small amount of stock which is rising in price. But we have to face facts – property prices are set to continue on their upward trajectory and the longer one waits to buy, the more expensive it’s going to be.

– A Newsletter Editorial by Director Michael Moore FNAEA, MARLA.