Monthly Market Review April 2013
Last month we commented that sellers might once again be ahead of the curve in raising prices, leading to another prolonged pause in transactional volumes. Subsequent data suggests this to be the case. Figures released at the end of April have been less positive than those in March with Hometrack and the Land Registry recording house price growth of only 0.3% and 0.1% respectively.
Nationwide’s figures suggest a fall in average prices of 0.1% but their overall comment is a positive one with an upward trend in market sentiment and a rise in the number of mortgages they are granting.
Garrington has seen a continued rise in market interest, having received a notable increase in enquiries in April. This reflects a trend across the prime market as positive news from London, coupled with the on-going restriction of stock in the prime market as a whole, resulting in more buyers seeking professional help with their purchase.
The UK market is dividing
Published data continues to suggest that the UK property market is improving. However, the emerging trend of a splintered market seems ever more evident this month with the North v’s South and Prime v’s Rest-of-Market data showing market sectors operating in completely different and, in some cases, almost directly opposite ways.
According to Land Registry figures (which show prices actually paid), average prices for England and Wales increased by 0.1% between February and March. Regionally however many areas saw percentages dropping, particularly in the North West (-2.5%) and North East (-1.8%) whilst London enjoyed growth of 2.5% (as illustrated below). The same data also found that monthly transaction volumes for properties worth over £1m increased by 28% compared to the same time last year, whilst those worth £250k or less are down 8%.
Gap between asking prices and selling prices increases
According to Rightmove, average asking prices reached their highest April level on record this year at £244,706 (as illustrated below). Whilst this is a further indication that market confidence is high, both the Land Registry and Hometrack are reporting less enthusiastic growth in selling prices meaning that the gap between the two is increasing. Garrington highlighted this possibility as a concern last month as bullish sellers and cautious buyers are likely to further accentuate the current divided market – values and transactions will accelerate in areas of growth whilst those experiencing stagnation and a drop in values are likely to see more of the same.
Average Prime Central London property value exceeds £1m
To further highlight the growth in London, recent industry research indicated that the average price of prime London property broke the £1m barrier in April, with prices in London as a whole having risen by 9.6% over the last 12 months.
The number of international and cash buyers flocking to London shows no sign of diminishing as prime central London remains top of the list of properties for a safe, long term investment. Hometrack’s latest report supports this, showing that demand for property in prime central London is growing three times faster than supply and 46% of all prime London valuations are now over £1m.
Investing outside of London
At the beginning of April research from a leading property agency highlighted that international investors, particularly those from Europe and the CIS, are dominating the prime UK market. The figures highlighted that they are now showing interest in the Home Counties which offer relatively low purchase prices, attractive yields and are close enough to London to mean a likely increase in capital values. Over recent weeks Garrington has seen a significant increase in demand from High Net Worth Investors looking to acquire residential properties, and although secondary markets can offer higher income yields, typically primary markets are still offering higher blended returns when capital appreciation is taken into account.
Sustained trend or seasonal blip?
As is ever the conclusion in the current market, there is no single or clear outlook. For some time now Garrington has worked at focussing clients’ mindsets at a local level as the rules of the game are changing, and it is clear that the property market is a fractured entity with no obvious trend applicable across all regions or price brackets.
In a recent Press Article we commented that “for the country as a whole, the fourth consecutive rise in the annual rate of growth shows the market is once again beginning to fire. Some regions of the UK, of course, remain under pressure. The market is still deeply polarised, with the increasing national average masking the huge divergence between London’s surging prices and those in the North which are stuck in reverse. The market is being driven not just by opportunist buy-to-let investors, but also by first-time buyers who are the key to more sustained growth”.
As we highlighted last month, momentum is the key in today’s market. Whilst austerity measures will affect affordability in some cases, Garrington feels that positive factors from both the growth in prime values, and the 'shot-in-the-arm' that Help to Buy will give the sub £600k market, are likely to have a positive impact throughout the market in the shorter term. However we would add a note of caution that property must be priced in line with local market conditions to sell well – those properties that are overpriced when they hit the market will continue to languish until the asking price and market sentiment agree.