While there was a fear that the end of the stamp duty threshold incentives might lead to a quieter market, so far, the reality has been quite different.
A new record asking price was set in April according to Rightmove, with average house prices climbing by 1.4% (+£5,312) during the month to reach £377,182. Given some of the prevailing factors - this may not be the only record we see this year.
The return of sub-4% mortgage rates, along with some lenders relaxing their affordability stress tests, should also offer a boost to prospective buyers.
New buyer demand was already up 5% at the start of April compared to the same time last year, while the number of new sellers entering the market also increased by 4%, according to Rightmove.
Global trade tensions - while a concern for the wider economy - could also benefit mortgage borrowers. The Bank of England is widely expected to cut rates in May, with some predicting three reductions by year-end (one more than previously forecast) as Monetary Policy Committee (MPC) members consider the risks of slowing economic growth.
If these forecasts materialise, we could see Bank Base Rate fall from 4.5% to around 3.75% by December.
Bidding wars
As house prices rise, competition for properties in some locations can become fierce.
Interestingly, Rightmove’s data shows that it’s buyers at the top of the housing ladder who are seeing the biggest price increases, with asking prices in this bracket (£675,000+) rising by 3% in April. The North West is also performing well, with annual house price rises of 2.6%.
In a competitive market, some buyers may be tempted to offer over the asking price in a bid to secure the property - particularly if it is a sealed bid situation.
For those unfamiliar with the process, in such a scenario, if there are a number of buyers interested in a property, an estate agent and the seller may decide to go to sealed bids - which as the name suggests, means submitting their offer in a sealed envelope by a particular date and time. No bidder knows how much the other participants have bid, with the highest bid usually the winner.
However, it’s worth noting that the highest bid doesn’t necessarily reflect the property’s true value.
Boots on the ground
It’s our job as surveyors to protect lenders from lending on overpriced properties. In a fast-moving market, an evidence based approach to valuations is essential - and that’s where local knowledge can make all the difference.
For surveyors, we need to be confident that when the music stops, lenders aren’t left exposed and potentially sitting on properties that have been overpriced - which isn’t good for the buyer either.
Likewise, if there’s an area where things are moving quickly and people are consistently offering above the asking price, this also needs to be taken into account. A surveyor can speak to local agents, draw on local knowledge and get a sense of what’s happening in the area, and factor this all in when considering the valuation.
That’s why, in a busy market like the one we’re seeing now, in-person valuations - and also desktop valuations - will always have the upper hand compared to those relying on an Automated Valuation Model (AVM).
The problem with Land Registry data is that it can be six to 12 weeks behind. So we can’t rely on it alone. If you’re relying purely on an AVM, it’s crunching historical stats and doesn’t necessarily reflect a market that’s shifting quickly, where there might be sudden spikes or drops.
That’s why human input is so important - for surveyors and lenders. Having someone who’s out there, speaking to people, and tuned into what’s happening in real-time, gives a far clearer picture of a property’s value than data alone ever could.
