2015 – Happy New Year?
That economic sage of our time, Cristiano Ronaldo of Real Madrid, neatly summed things up in 2008 when he said “There is no point in making predictions. It’s not worth speculating because nothing is set in stone and things change all the time.”
So, time to have a look into 2015!
The wider housing market should continue to benefit from a helpful, and hopefully improving, economic backdrop. Falling unemployment from the current rate of 6%, consumer price inflation falling towards 1% and oil prices at around $50 per barrel should help to maintain a benign environment to keep interest rates unchanged throughout most of 2015, adding to the 70 month-long run at 0.5%.
Other important factors that cannot be overlooked for 2015 are the continued and almost unwavering desire to own a home – which is backed up by the NAEA reporting the highest number of house hunters since October 2004 – and the Chancellor surprising us all with his early Christmas present of Stamp Duty Reform. The impact of this change will become evident over the coming months and years but, with the breakeven point against the old system set at £937,500, it is likely to be positive.
However, will the Chancellor’s generosity create a housing bubble or return us to the activity levels seen in the first half of 2014? ‘Probably not’ is a safe answer.
MMR, introduced back in April 2014, is doing the job it was created to do via tougher mortgage lending criteria and there is uncertainty ahead of the General Election in May and the colour of our next Government: Blue, Red or a Rainbow? At this stage it is almost certainly guesswork.
The Halifax released their annual First Time Buyer Review on the 6th January and reported a 22% rise in first time buyers – up from 268,500 in 2013 to 326,500 in 2014.
Other positive highlights from the report included a fall in the size of the average deposit by 7% in 2014 compared to 2013 and improved mortgage affordability. In Q3 of 2014 mortgage payments represented 32% of the disposable income of a first time buyer which is a steady decline from its peak of 50% in 2007.
All of which is positive news as first time buyers are vital to a healthy and properly functioning housing market and increasing transactional volumes.
So now it is time to ignore the advice at the start of this blog and stick my head above the proverbial parapet. I’m going to predict a flat start to 2015 lasting until around May, an upturn post-election (hopefully a mini-boom) and growth in transaction numbers in the second half of the year of around 3-4%: a handy petard with which to hoist myself to this time next year.
Happy New Year.