Quarterly UK Market Review - Q2 2011
A Quieter Spring Market
During the first part of the quarter, the Spring market this year has been unseasonably quiet, with a lower level of transactions and poor availability of good quality properties. According to HMRC, transaction volumes were 5% lower in the first four months of 2011 than they were in the same period in 2010. Prime stock levels have remained relatively low compared with demand, but in the mainstream market the latest data from the RICS cites an increase in stock per surveyor.
Asking Price Stalemate
Garrington has observed increasingly optimistic asking prices being set by vendors and sales agents. Only a select few of the finest homes in the best locations are actually achieving or exceeding these prices.
“Vendors expectations still remain high”, says Rod Tabor, Associate for the South West. “They are increasingly hoping to achieve prices in line with pre-recession values in order to prevent a loss, however in these cases the asking prices are not reflective of the property’s current value”. Andrew Marshall, our Associate in the East Midlands notes, “This approach is putting off potential buyers unhappy with settling for inflated prices and is causing houses to stagnate on the market for some time. Whilst stock levels are rising, transaction levels are not matching up”.
This is underlined by official statistics, based on actual prices paid, with a 0.1% price decrease in the quarter ended May.
Rising Tenant Demand
With the average first time buyer age now at 37, there has been a surge in demand for rental properties, with a growth of 1 million tenants in the UK’s private rental sector since 2005. This has opened up considerable buy-to-let investment opportunities throughout the UK, with the Government encouraging investment in this sector. We continue to be approached by clients seeking assistance to embrace this market opportunity.
Regional Micro Markets
It is becoming ever clearer that there are regional contrasts in levels of market recovery. London continues to take the lead, with high demand for properties in all price brackets and consistent international interest, especially in Prime property.
Throughout the UK, there are micro markets that continue to outperform regional trends. In East Anglia, house prices have fallen by 1.5% in Q2 according to Nationwide, whereas in Cambridge house prices have increased by 6% with the city being the 4th best performing in the UK. By contrast house prices have fallen by 1% in Norfolk. Similar patterns appear in Yorkshire for Harrogate and York when compared with Leeds. In Kent, Royal Tunbridge Wells leads the market, where Chris White, our Associate in the South-East, has seen rising expatriate demand because of quality grammar schools and a fast commute to London.
Arguably, the continued strength of these more affluent micro markets will be a pivotal factor in a full market recovery, which in itself relies on economic growth, investment, employment opportunities and need for housing.
Outlook – History Repeating Itself?
For the last three years transaction levels have been at less than 55% of their pre credit crunch levels and this trend, based on HMRC data so far this year, looks set to continue. Low interest rates and an increase in the number of those in employment are positive factors.
The contrast between the recovery in the mainstream market and the Prime market is in Garrington’s opinion becoming increasingly pronounced. Following the last recession, it was both London and the Prime Sector that led the recovery and this certainly appears to be the case again, and we have continued to successfully acquire properties in these sectors for clients at below asking prices in recent months. There are also an encouraging number of pre-market opportunities starting to emerge, for properties that are being readied for sale in the Autumn, although sensible pricing amongst sellers will be a key factor in attracting the increasingly discerning purchasers in the market.
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