Moving on up

It is hard to begin to move when you don’t know where you are moving, how to move, or if you are going to get there. 

It’s long been said that the health of our domestic economy – especially those parts connected with housing – is directly correlated with the number of housing transactions. A healthy churn of people buying and selling their homes – doing them up before selling, re-doing someone else’s hard work once they’ve bought etc. – is what it takes to keep the RMI sector moving and builders, merchants and suppliers busy.

Plus, of course, there’s the add-on benefits to those associated with the rest of the chain – the conveyancers, the estate agents, the removal companies, and home furnishing departments from John Lewis to Home Sense.

So, judging by the latest housing report from the Lloyds Banking group, we may be in for a sticky time.

The Lloyds Bank Homemover Review, published on Friday (Jan 20) shows that the number of homemovers reached 354,000 in 2016 – a drop of 4% from 2015’s estimated total of 367,300. Only a 4% decline, but it still represents to the first annual decline since 2011, following four successive years of growth.

True, the overall number of homemovers has grown by 12% since 2009 when it hit rock bottom at the height of the banking-credit-crunch-fuelled recession (315,000, the second lowest since records began), but it is still half what it was when it hit 712,000 a decade ago.

Why so?

Well, house prices may have something to do with it. In London (which is always a bit of a basket-cased in terms of prices it has to be said), homemovers saw the average price rise by 75% to £560,946 – the highest on record. This is three and a half times higher than in Northern Ireland (£162,696) – and £165,407 higher than the second most expensive region, the South East (£395,538).

Higher priced houses mean people have to come up with bigger deposits. Not so bad if you are in the middle of the chain and have equity in your existing property or savings, pretty hard for many people wanting to get onto the ladder in the first place. And without those first time buyers, there’s no churn – no-one to buy the houses of those who want to become second and third-time buyers.

However, according to the report, it’s not those first-timers who are in short-supply, despite affordability, at 5.3% of average salary, being at an all-time low. No, the slowing housing market is largely down to homeowners unable to move up the housing ladder. 

Mortgages director at Lloyds Banking Group Andrew Mason, said: “Whilst higher prices will have lifted equity levels for many current owners, the low availability of the ’right type‘ of homes for those looking to move up the housing ladder may have constrained market activity.”

Stamp duty isn’t helping those further up the housing chain either. The reforms that former Chancellor George Osborne brought in at the end of 2014 simplified the tax, reducing it at the bottom of the chain but making it much more expensive for anyone in the top section. This is something the BMF has been talking to Government about – how we can use stamp duty to encourage people to move down through the property chain, releasing houses for those who want to move up.

A turnover of houses of all types and at all budgets is required for a healthy housing market. Getting people who want to to downsize is as important for transaction levels as encouraging first time buyers is.