House prices set to surge after the World Cup

Get set for a housing market boom when the final whistle blows in the World Cup...

What are you most looking forward to following this year’s World Cup?

The victorious England team parading the winning trophy around London? Escaping the unremitting pain of ITV’s woeful match coverage? The blessed sound of silence once the last vuvuzela has sounded its final toot? Or perhaps you are excited about the impending UK housing market boom?

I’m not joking.

According to research from estate agency Your Move, the housing market is set to surge once the world says goodbye to the greatest show on earth.

In fact, it has even put a figure on the amount that housing transactions will rise by in the month after the World Cup -- a small but significant 8%. Even more significant when you take into account the Council of Mortgage Lenders’ (CML) latest mortgage lending figures, which show a 12% decline in lending in April. An 8% boost in transactions would be very welcome indeed!

But how has Your Move come up with such a discovery? Is this just another World Cup related piece of PR puff, or is there some basis of reality in its calculations?

History lesson

To be fair, there is a precedent for a post-World Cup property boom. In fact, the estate agency says that according to official Government figures the number of transactions in the month following the last seven World Cups has risen by an average of 8% compared to the month of the tournament. Sometimes the rise has been even greater, such as in 2006, when property transactions surged 10% from 160,000 in June (when the footy was on) to 176,000 in August.

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I’d hazard a guess here that transactions levels were on a pretty consistent upward trajectory throughout the boom year of 2006, but perhaps the jump was more marked following the football.

Plus, the rises recorded are not just monthly jumps, but also annual rises. For six of the last seven World Cups, the month following the tournament has seen increased activity compared to the same month the year before, rising by an average of 7%.

Why the rise?

The explanation given for this increase in transactions is that we are all glued to the screen during the World Cup with no interest in househunting whatsoever. Then once the tournament is over, there’s a boost in transaction levels as we finally vacate our armchairs and get back to our other favourite pastime -- buying property.

However, I’ve got another theory, because if transactions are rising in the month following the World Cup, usually July or August, doesn’t that mean that the actual offers would have been accepted earlier in the year? After all, it can take two or three months to get a purchase from offer to completion, so I fancy the real boost would have been in April or May to have fed through to increased transactions in the summer. In that case, is this not just a case of the usual spring bounce in homebuyer interest?

Either way, it’s great to hear a positive housing market forecast, because not everyone is currently feeling so rosy about the property market.

Doom and gloom

Indeed, the increased unemployment figures released last week could spell danger for arrears and repossessions levels, according to some pundits, who warn that unemployment is only set to worsen as public sector cuts bite, and that this will impact on people’s ability to pay their mortgages.

It could also put the brakes on transactions as those in the public sector are not likely to looking to move house while the sword of Osborne is hanging over their heads.

We are already seeing a slump in the number of first-time buyers, with the CML noting that in April they fell to their lowest level since September 2007, accounting for just 35% of all purchase mortgages.

And just 45% of consumers surveyed by the Building Societies Association in June think that now is a good time to buy property. This compares with 49% asked the same question in March, a rise in negative sentiment that the trade body puts down to fear of Government austerity measures.

If that wasn’t enough, property prices are falling, according to Halifax, which noted a 0.4% drop in the average UK house price in May, and predicted prices will remain flat during the year as a whole. That’s hardly going to spur people on to buy is it?

But hang on a minute, there is some bullish news too.

The future’s bright

Nationwide disagreed with Halifax, noting a rise in property prices in May. It said that prices inched up 0.5% during the month, with a healthy year-on-year increase of 9.8%, taking the average UK property price to £169,162.

Last week the Department for Communities and Local Government published its April housing statistics, which were also pretty positive. It reckons prices increased by 10.1% from April 2009 to 2010, rising 0.4% during the month.

And the Royal Institution of Chartered Surveyors also said last week that its members reported a rise in house prices during April, plus they are more optimistic about future housing market activity than they were last month.

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So it’s not really all doom and gloom at all. It just feels like it sometimes.

The fact is that the housing market isn’t moving clearly in one direction and that’s why it’s so difficult to know what to make the contrary reports. My best guess is that the market is going to be fairly flat in 2010, but that is, of course, subject to Government cuts and their impact on the wider economy.

As for the football, I have to admit I’m pretty pessimistic about England’s chances. But that’s probably because, as a Man City fan, I’ve long-since learned to rein in my expectations!

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