What do this week's housing market figures really mean?

We’ve had a flurry of data for all of us involved in the property sector to mull over on our sun loungers this week.

A report from the Royal Institute of Chartered Surveyors (RICS) raised alarm bells over housing supply, Office for National Statistics (ONS) data on house price trends and an uptick on the rate of inflation.

So, what did it all say? Well, according to RICS, we’re experiencing a record low in the supply of homes coming to the market, while demand from buyers, now the uncertainties of the election are over, continues to rise at pace – the quickest for 18 months, RICS reports.

This seems to have had an impact on prices. The rise reported by the ONS seems to be against the longer-term trend. The rate of house price growth has actually been falling over the last year, again perhaps reflecting the political uncertainties, is this ONS data the first of larger rises to come as supply continues to fall?

Inflation going up to 0.1% has also sparked a debate about a possible rise in interest rates coming sooner rather than later. With wages now out pacing inflation and the economy set to grow by a reasonably healthy 2.5%, there’s clamour in some quarters to see a rate rise this year.

This leaves those looking to enter the home moving process in a quandary, particularly the first-time buyer. With supply falling but prices rising and interest rates set to leave their historic low, I fear that more and more people are going to find themselves excluded from the process, with deposits out of reach and mortgage rates they can’t afford to repay.

At the Conveyancing Association we’ve also cautioned against a rate rise too quickly and we don’t think there will be a rate rise for some time to come. Despite the changes to mortgage rules which seek to war game rate rises for customers, our members are seeing clients still with considerable housing debt and wages need more time to catch up. 

We’re also not expecting inflation to hit the Bank of England’s 2% target for some time, which means there’s more of a cushion to raise rates gently towards the back end of 2016 when the recovery will hopefully be in a more settled state.

Interest rates have tended to be a blunt instrument to calm certain parts of the market down. If we want to see price rises stabilise and deal with the problems that RICS is raising, we’ve got to see more homes come onto the market, and that means ultimately building more of them. 

*Eddie Goldsmith is Chairman of the Conveyancing Association and Senior Partner at Goldsmith Williams