Warnings of an “acute shortage of supply” as Britain’s ageing population of home owners moves less frequently
House prices could rise by a quarter in the next five years, a report predicts today after finding the number of homes for sale has fallen to its lowest level since records began in 1978.
The Royal Institution of Chartered Surveyors (Rics) warns of an “acute shortage of supply” as Britain’s ageing population of home owners moves less frequently and focuses instead on helping their children on to the housing ladder.
Each surveyor had just 52 for-sale properties on the books in May, the organisation found, the lowest monthly figure registered in nearly four decades.
Simon Rubinsohn, chief economist at Rics, said the falling supplies, which confounded expectations of a post-election bounce for the property sales market, were part of a “clear trend” in place for nearly two years.
He said with demand for homes still rising – in part thanks to Government policies such as the Help to Buy scheme – prices should resume a sharp upward trajectory, having slowed ahead of the election.
The findings will intensify the debate about whether sufficient numbers of homes are being built to serve Britain’s growing population, he added.
“There had been some hope that the removal of political uncertainty would encourage more properties onto the market, but the initial indications are that this is not proving to be the case,” Simon Rubinsohn said.
“It is hardly surprising that prices across much of the country are continuing to be squeezed higher with property set to become ever more unaffordable.”
Experts said people ageing in better health were staying in their homes for longer, leading to fewer family homes going on the market. The situation was being exacerbated by a lack of “suitable” retirement properties, they added.
Future generations of home owners under threat
Parents, whether middle aged or retired, were “acutely aware” of the difficulties their children faced in buying their first home – and were diverting funds and attention to that aim, rather than seeking to move.
“The reason for last month’s fall in demand is hard to rationalise, given the election,” Mr Rubinsohn said. “But people’s behaviour is certainly changing. There is a greater tendency to look at the cost of offspring getting onto the ladder and decide to hold on [to the family home] and perhaps release some equity or use funds to buy property, perhaps to let for a while, which ultimately would be for the kids.”
Matthew Pointon, of financial researchers Capital Economics, said: “The figures are a puzzle but we never thought there would be a huge election bounce. Certainly older households don’t move as frequently and that may be playing a role.”
The low cost of mortages had also contributed as people took advantage of the cheapest-ever interest rates to lock into long-term deals rather than move. Mortgage brokers said people in larger family were also put off moving by tougher loan criteria introduced just over a year ago. A Telegraph investigation in March found some lenders were blocking customers from taking their loan with them when they moved.
At the top end of the market owners had been put off selling by changes to the stamp duty regime in December, estate agents said.
The higher cost moving to a property worth more than £1.5 million meant fewer were going on the market, with the supply problems “trickling down the ladder”.
Guy Meacock, of buying agency Prime Purchase, said: “With the cost of moving so high, many homeowners are preferring to stay put and improve what they have got, rather than go through the stress, hassle and cost of moving.”
“The sales market at the upper end is still digesting the changes in stamp duty and it is now dawning on sellers that buyers can’t stomach higher transaction costs of 10 to 15 per cent of the purchase price, with about £1 million in costs on a £10 million purchase.”
Seller buyer stand-off
The figures published by Rics show new property listings have been declining for four months and there had been no meaningful growth since 2013.
London and the North West saw the sharpest contractions in the supply of homes for sale, while Scotland was the only area of the UK to have seen an increase in the supply of properties.
Meanwhile, 10 out of 12 areas covered in the survey showed a pick-up in enquiries from buyers, although buyer interest was reported to be broadly unchanged in Wales and the South East of England.
Jonathan Adams, director of prime central London estate agency Napier Watt, said: ‘It is a chicken and egg situation – people are choosing not to put their property on the market because there is very little to move to.
“Why risk selling your home and having to move into rented accommodation because you can’t find anything to buy?”
Guy Meacock, of buying agency Prime Purchase, said: “If you sell, where are you going to buy? With not much stock on the market, there is little choice and many chains are falling through as a result. It is a real challenge trying to find someone who is prepared to sell at the right price.”
Paula Higgins, of the HomeOwners Alliance, said: “This makes for a dire situation for first time buyers as they are chasing a smaller pool of properties and are competing with those buying properties as an investment.
We should also take into account lack of suitable properties (e.g. retirement suitable) to move to may stop people from putting their own home onto the market – especially downsizers who are frightened of big moving and stamp duty costs.
It makes financial sense that people hang onto their own properties because of low interest rates – if they need to move they can raise financing from their existing property.”
Housing and Planning Minister Brandon Lewis said: “Our reforms have got the country building again – cutting planning policy from more than 1,000 pages to just 50. This is reaping results, with the latest figures showing housebuilding up over 10 per cent on the same period last year and planning permissions granted for 253,000 homes in 2014.
“In addition, housing starts and the number of first time buyers have doubled since 2009 and are continuing to rise.
“We are committed to building 275,000 extra affordable homes with £38 billion of public and private investment, achieving the fastest rate of delivery for 20 years.”