Similarly, in the two days following the UK EU referendum in 2016 the price of UK housebuilder shares fell by 40 per cent, demonstrating investor concerns about a slow-down in the UK housing market.
Fortunately, the UK housing market is not as volatile as the stock market, however investor sentiment, in my view, provides an immediate and often very accurate view of the outlook for the UK housing market.
The Twindig HMI tracks investor sentiment across estate agents, property portals, housebuilders and major UK mortgage lenders to look for clues as to the future direction and prospects for the UK housing market. I would advise against looking at it in isolation, it will certainly not tell us what is going on in any one street, but it adds useful big picture context and insight.
How has the Twindig HMI performed?
We show the Twindig HMI with a level of 100 at the start of the year and investor sentiment fell by 50 per cent before the UK Government closed the UK housing market. The index has increased by 26 per cent since the UK housing market re-opened but remains around 30 per cent lower than it was at the start of the year. The trend or direction of travel however is up not down.
Is investor sentiment the same across each part of the residential market?
In one word, ‘no’. There is quite a range across the different subsectors. Investors are most concerned about UK mortgage banks. Sentiment had fallen by 50 per cent by the start of lockdown and hasn’t recovered since, with the lenders’ index reading 51.1 at the time of writing. The implication here is that mortgage volumes are likely to be constrained, especially at higher loan to value levels, which will add insult to injury for our beleaguered first-time buyers. Investor sentiment is also not helped by the fact that the lenders themselves expect housing market conditions to get worse before they get better.
Investor sentiment in the UK Housing market is an important lead indicator of its future performance.
Next up are the estate agents, although on an upward trend their current sentiment index stands at 56.2, this suggests that investors do not currently believe that the mini-boom will last and we must remember that investors will have taken some cues from the lenders as already discussed.
I appreciate that investors are not at the coal face and every estate agent I speak to tells me that they cannot remember being as busy as they are now, but investors are not yet willing to put their money where estate agents’ mouths are. It seems to me that investors’ concerns revolve around mortgage availability and the impact of the closing of the furlough scheme on unemployment. The concern is that we see a double-dip in the economy as well as a second spike.
Do investors have confidence in any part of the UK housing market?
In a word, ‘yes’. Now, please don’t shoot the messenger, but investor sentiment towards property portals is higher now than it was at the start of the year. At the time of writing the portal investor sentiment index stood at 113.1, that is 13 per cent higher than it was the start of the year. Investors, therefore, do not seem to be concerned by competitive threats to the larger portals or changes and vacancies in their top levels of management.
They also believe that the portals will continue to generate an awful lot of cash from their customers. If there is a silver lining here for estate agents and housebuilders it must be that investors believe that they will themselves continue to generate sufficient cash with which to pay the portals.
The Twindig HMI is published each week on a Monday and can be found at https://www.twindig.com/market-views
Anthony Codling is CEO of property platform Twindig.