The property market slowed in May as fewer people moved house and chose to remortgage instead, according to latest research from Connells Survey and Valuation.
Uncertainty in the market looks set to continue as rising long-term property values and political instability has made moving home a less attractive proposition.
Valuations for home sellers have fallen gradually from nearly half of the market in May 2010, down to just 27 per cent last month as homeowners lack financial incentives to move.
Limited: Reduced housing stock means people already on the property ladder can’t see their next move in the market
The mortgage market is currently being supported by remortgaging which now represents 23 per cent of all valuations – a two per cent point increase month-on-month and a record for May.
The property market is being stalled by a shortage of homes available to buy and stamp duty impacts at higher levels.
This has discouraged homeowners from moving on – and after last week’s General Election and the economic turbulence of the past few years, many potential movers have adopted a constant ‘wait and see’ attitude.
John Bagshaw, corporate services director of Connells Survey and Valuation, said: ‘The wind has been knocked out of the market’s sails. Fewer people are choosing to move home.
‘The limited housing stock means that people already on the property ladder can’t see their next move in the market.
Huge drop: Selling property as a percentage of all valuations
‘The long-term increase in property values over the past seven years has reduced the financial incentive to move, with more homes slipping into the higher Stamp Duty bands.
‘This means potential sellers could face a larger tax bill should they chose to move up the ladder when buying their next home, thus making it more difficult to free up housing stock to be used more efficiently.’
Remortgaging: Market activity in May compared to the five year average
While valuations from those looking to sell their home are down, remortgage valuations have risen by 7 points when compared to the five year average for May.
John Bagshaw added: ‘With homes worth more than they were five years ago and low interest rates on offer from lenders, many have taken the opportunity to refinance for a better deal.
‘This should cut monthly repayments and provide some additional financial security to help homeowners get through any potential economic uncertainty ahead.’
Latest data from the Office for National Statistics show that house prices rose £3,500 monthly, mainly down to the problem of supply and demand.
Jeremy Duncombe, director of Legal & General Mortgage Club, concludes: ‘The main factor behind continued house price inflation is still the vast difference between supply and demand.’