January is a time of new beginnings, and with a clear election outcome it’s also a time of growing confidence in the housing market. That is the industry sentiment revealed in the latest RICS Residential Market Survey for the month of December.
The survey highlights three areas suggesting that the market is tentatively taking more confident strides into 2020: 1) that sales expectations have markedly improved for both the near team and the next 12 months – incidentally the first positive result since May 2019, 2) modest enquires for both sales and instructions have increased over the month, and 3) that house prices over the next three to 12 months are anticipated to accelerate.
Post-Election Conservative Majority Reveals Positive Housing Indicators For 2020
The latest RICS survey shows that industry sentiment in the housing market is starting to become more positive following the December 2019 election. Much of the renewed confidence is down to the new Conservative government’s majority in Parliament. It also reflects a certain degree of continuity in existing and planned policy that will affect the industry for the next 12 months.
Simon Rubinsohn, RICS chief economist, commented on the survey findings that “the sales expectations indicators clearly point to the prospect of more upbeat trend in transactions emerging with potential purchasers being more comfortable in following through on initial enquiries.”
Of the survey respondents, over 31% are now anticipating that transactions will increase over the next three months.
For both consumers and property agents kicking off 2020 it means all systems go. That enquiries are on the increase and that sales expectations are on the up should bring relief to homeowners who have either waited to sell or have watched their property sit on an uninterested market.
Are The Wheels Beginning To Turn On The U.K. Economy?
2019 was underwhelming for the country’s economic growth. The latest ONS GDP estimate shows a rather stagnant 0.1% market growth in the three month leading up to November last year. A familiar economic snapshot that we’ve become accustomed to for the last few years.
But indicators are starting to flash for more positive economic growth.
At the close of last year, the world-renowned behavioural economist Roger Martin-Fagg spoke at a Property Academy event to discuss his economic outlook for the U.K. housing industry and the wider economy in 2020.
His forecast for the next 12 months is optimistic in light of the government majority, predicting Real GDP growth to hit 2.2% by year-end.
If it transpires, then it is great news for the housing market as it means that money supply is on the up and consumers are willing to borrow and to spend. 5% growth is anticipated in the first quarter of 2020, with a 5% increase in average house prices by the end of the second quarter; and by April, Martin-Fagg estimates that there will already be a 10% increase in transactions – corroborating the increasing optimism of the RICS survey.
With wage growth also predicted to go up 4% and interest rates likely to remain the same until November, overall, it’s likely to be a good year.
Agencies Report Optimistic Results Following Election
Estate agents have already started to speak about the positive effect of the “Boris Bounce” on their businesses. Just this month leading estate agencies Savills, Winkworth and Chestertons announced that business has picked up since the election.
Savills announced in its year-end trading update that the clear election outcome has “prompted a strong close to the year as confidence to transact returned to the market.” They anticipate that the real estate market should maintain its improved sentiment over 2020 given the increased political stability. Savills’ share price rose 7.22% following the update and their report of “excellent performance” in the U.K., ahead of revealing their full-year performance later this year.
Winkworth’s own share price soared 13% after they announced positive full-year 2019 results; most notably recording “an upturn in transactions outside of London as buyers decided to get on with their lives after years of watching and waiting.” The election result and more clarity on the direction of Brexit are both cited as the reasons why.
Chestertons, a central London estate agency, reported an “unprecedented” surge in activity at the beginning of January. Since the election, Chestertons announced an increase in sales enquires by 76%, instructions by 20%, new buyer registrations by 15% and offers received by 43.7%. This is great for the London market, as it implies that pent-up demand is being released, which could see the capital’s supply glut be satiated.
It’s certainly a strong start, one which I’m sure will be reflected in the results of many an agency in the months to come.
Rising House Prices And Brexit Overcast The Latter Half Of 2020
The strong start and all the indicators towards the months ahead make me optimistic about the growth potential of the housing market of 2020. It’s a chance for transactions to finally move forward and it will hopefully create opportunities for those looking to get onto the first rung of the ladder.
Nevertheless, it would be prudent to mention the fact that affordability and supply are crucial to a healthy housing market. If house prices increase as predicted they will be even less affordable for many people, particularly if wage growth doesn’t increase sufficiently to match. And after pent up supply due to Brexit uncertainty has run its course, it will be critical that new builds emerge in large numbers to keep fuelling demand.
Nonetheless all signs so far point to a resurgence in the market for 2020, which is itself cause to move forwards optimistically. The forecasts for the year ahead are almost all positive, and if the government enacts favourable legislative policies such as an amendment to stamp duty then I believe that the outlook for the market could get even brighter.