Estate agents are increasingly optimistic that 2013 will see housing transactions rise. That’s encouraging for their books. But if they’re right it’s good news for construction, house builders in particular.
Since the late 1970s there’s been a close link between private house completions and overall housing transactions. Roughly, for every ten homes sold one home is built. So the more existing homes are sold the more new homes are built.
According to RICS’s latest monthly housing market survey buyer interest has been increasing since last September and instructions from sellers have been growing for a similar period.
Prices seem to be a bit more stable and there are high hopes that the Bank of England’s Funding for Lending Scheme is loosening the mortgage market.
This more benign background seems to be behind a leap in confidence among agents that sales will flow more freely this year. A positive balance of 48% of those polled seemed to think sales will increase over the coming 12 months, up from a positive balance of 20% a month ago.
Meanwhile the balance of views from a wide range of forecasters suggests house prices might nudge up this year by about 1% or 2%. That would take an edge of negative equity fears, but does equates to a small real-terms fall and potentially makes homes more affordable.
There will obviously be a spread of fortune across the country and between types of homes. But that level of house price growth is probably exactly what the Government policy makers and indeed house builders want to see.
House prices ended 2012 pretty close to where they were in 2011 and basically house prices look set to continue flatlining, pretty much, in 2013.
The graph shows we have now had three years of stability in three much-watched indicators of the housing market, transactions, mortgage approvals and prices.
Within that there has been a steady, if small, drift upward in transactions for the past 18 months or so. Broadly put on an annualised basis transaction are up about 8% this winter compared with the summer of 2011. Sadly that is an 8% rise on a very low base.
Also over the past two and a half years we have seen in England the number of private homes built, measured on an annualised basis, running pretty stable around the 86,000 mark.
There is consensus among many in the housing world that the key problem is access to mortgages for low-equity potential buyers, especially the young and first-time buyers. This of course is hugely simplified. And taking a long-term view it is almost certainly wrong, given that homeownership was increasingly hard to access in the run up to the credit crunch despite banks were offering insane mortgage deals.
But, mortgage availability is a short-term constraint. More mortgage finance would increase sales and provide a shot in the arm to help boost private house building numbers. This is why so much hope is being pinned on the Funding for Lending Scheme.
On the more worrisome side we have to balance any swell in optimism generated by easing credit conditions against any potential for ebbing optimism caused by growing fears over unemployment.
It was clear before Christmas that many baubles in the retail tree were hanging by threads. So the move of Jessops and HMV into administration was no shock. But with poor growth and poor productivity haunting the UK economy there is a risk of rising job losses. And I suspect many firms held off until Christmas was out the way before making uncomfortable decisions about cutting jobs.
We’ll see. But for now let’s be happy that even the prospect more homes sold in 2013 will warm the cockles of the hearts of many.