Housing transactions will not reach the million mark this year – and are unlikely to do so for some time.
David Smith, economics editor of the Sunday Times, and Countrywide boss Grenville Turner, were both hitting back at headline-making forecasts from the Item Club that sales would recover to a million this year, with a further increase next year.
Speaking at the Great Housing Debate, organised by the Wriglesworth Consultancy in Westminster yesterday, both poured cold water on the forecasts.
Smith said that the level of transactions at present is “too small in proportion to the size of the market”.
He went on: “I do think that transactions will go back up to the one million mark, but it will take three or four years for it to happen.”
Grenville Turner, chief executive of Countrywide, agreed, adding that a new housing bubble in prices could not be ruled out.
Turner said: “After the Item Club forecast appeared, I had quite a few journalists on the phone to me asking for my opinion.
“But unless the final one-third of this year is going to be four times busier than the norm, it’s not going to happen. I believe we are some way off going back to a million transactions in a year.
“The reality is that we are in a stagnant market for transactions. Commentators don’t seem to have picked up that last year, there were almost the same number of transactions as 2008 – the bottom of the market.
“Our experience in the first quarter of this year is that things are no different. In five years, we have gone nowhere.”
Turner also said he could not rule out another house price bubble.
He said: “In the States, they went into the housing market recession 12 months before us, and are starting to come out of it 12 months before us.
“In America, the issue now is a shortage of stock and a house price rise of 20%.
“We have exactly the prospects of that same recipe. A shortage of stock is the biggest problem that estate agents currently have.”
He said that in order to improve the housing market, a better supply of stock was badly needed. That, he said, was not going to come from new-build homes in a hurry and it was therefore essential to see more movement in secondhand stock.
Elsewhere in the debate, economics guru Smith also warned that the Help to Buy scheme, which will offer 95% mortgages from next January, is likely to be more of a “damp squib” than a “danger” that could distort the market.
Comments
Kevin
I totally agree, unless building levels increase of lender forbearance ends or interest rates spike, transaction volumes will remain low
AC
A 30% increase in price is again possible but highly unlikely, the proposed benefits could put downward pressure on rents and therefore prices in the BTL market
Wage inflation is forecast to remain low, which means that unless affordability ratios are relaxed people will not be able to get mortgages despite the January introduction of the HTB scheme
I can already see a price bubble forming.
I know the prices in my area "appear" to have increased by 10% since January. And they also seem to be selling.
Over a year that would be a 30% increase.
A family member is about to buy in East London and the prices are considerably higher than 12 months ago.
That said with mortgage criteria the way they are now, the question is what happens when interest rates rise?
Lenders are making it hard to borrow more than 70% at current interest rates and income multiples are much more sensible than they were which builds in a huge cushion should the base rate rise.
BUT, what happens when it all goes wrong again?
Its not impossible. Its highly unlikely, but its not impossible.