Should Consumer Confidence in the Purchase Market Be So Low?
If we go by the Halifax Housing Market Confidence Tracker then there is a sharp divergence between the optimism about the sales market and the general negative feeling towards purchasing a property.
Confidence in the purchase market is supposed to be at its lowest level since the start of the Confidence Tracker in 2011, with the proportion of respondents to the Ipsos Mori conducted poll who feel that now is a good time to buy a property having fallen to a net balance of +5, representing a fall of 29 points across the duration of the last quarter.
Within this fall positive feelings towards the purchase market fell by 16 points specifically among owner-occupiers between Q1 and Q2 of 2014, with owner-occupiers in London and the South-East – traditionally areas of higher prices and very high rental demand – being the most negative towards purchasing a property.
Should we be feeling so negative about the purchase market though? Is the picture so gloomy? Well, almost certainly not. If we look at the amount of purchases being carried through by buyers using money from the Government’s Help-to-Buy affordable houses initiative then we find record levels of completions and large numbers of new houses being planned for the future by developers.
Introduced in April 2013, the Help-to-Buy scheme offers property buyers, whether they are first-time buyers or home movers, an equity loan when purchasing a property of up to £600,000. The buyer must be able to contribute at least 5 per cent of the property price as deposit and have a mortgage covering up to 75 per cent of the price – the Government then steps in with a loan for up to 20 per cent to cover the remaining costs. There are also mortgage guarantees available on properties up to £600,000 in value for buyers. It is important to note that there is no limit on the income of each applicant for an equity loan.
In total the scheme has now helped over 40,000 buyers to buy a home – with well over 4000 household having taken advantage of the scheme during June alone, the highest monthly total since the scheme was introduced. In monetary terms around £1.1 billion of loans have been issued by the Treasury in order to support property purchases worth £5.65 billion overall.
In most cases buyers have opted for high percentage mortgages or a larger deposit than the 5 per cent requirement. The average value of the property purchased with money from the scheme was £187,000, with a fifth of all homes bought being in the £200,001 to £250,000 price bracket.
So given the right encouragement it seems that the picture is not so black as reports have suggested – buyer demand remains strong and people are a good deal more positive about the market than the Confidence Tracker statistics might lead us to think.