Monthly Market Review – April 2012

Following a brisk start to 2012, March appeared to be a tipping point with regards to market activity, due to conflicting house price and transactional data. April therefore was an important month in helping to determine whether the positive start to the year was likely to be sustained. Against a backdrop of challenging economic headwinds, the UK property market appears to once again be altering direction.

A change in sentiment

Traditionally April marks the start of an increase in market activity prior to summer moves, but for a number of reasons this year has not followed the seasonal trend. Many buyers, particularly in the upper quartile of the market, have needed time to digest the implications of the Budget and in turn assess how this affects wider wealth and tax planning. Clarity and confidence on such issues underpin positive market sentiment, and in the wake of the Budget both have been undermined.

Industry data appears to confirm a definite change in the health of the market. The RICS have reported that 19% more chartered surveyors have witnessed price falls in April compared with rises in March, with only London escaping the otherwise national trend. Nationwide suggests prices have fallen in April by 0.2% and forecast that the prices are likely to trend down in coming months. Halifax house price data for April reported a more dramatic 2.4% fall in prices, compared with the rise of 2.2% in March.

Our search teams across the UK have equally noticed a slower rate of property entering the market and less competition amongst buyers. In prime central London some family homes between £1M and £2M are for the first time in recent months taking longer to sell as buyers adopt a more cautious approach to their moving plans. However, the very top of the market still appears robust and in our opinion property in excess of £10M remains highly sought after.

Price gap begins to widen

As buyers become more cautious, managing expectations of sellers remains a challenge for many sales agents, some of whom have recently confirmed to Garrington that they are having to list new property at ‘vendor led’ prices rather than at levels aligned to market conditions. Data released by property portal Zoopla states that sellers of 34% of properties currently on the market have reduced their asking price since coming to the market. On average prices have been reduced by sellers by 9.2% across the UK in April. The prime sector of the market is not immune to this trend and we have seen a number of £1M plus properties revise their asking price in recent weeks.

Investment buyers remain active

One group of buyers that continue to stand out from the crowd is investment buyers. The Council of Mortgage Lenders has reported that the value of mortgages to fund investment acquisitions has risen by 32% in the first three months of 2012. This noticeable rise is arguably spurred by lower purchase prices and, in many areas rising rents. With rising property yields and volatile returns across many paper asset classes, real estate is proving attractive to sophisticated investors who are prepared to take a longer term view on ownership, and are attracted by income rather than quick capital gains.

Outlook

Whilst it may be premature to draw firm conclusions from one month’s data, Garrington believe that the market looks set to be turbulent for the remainder of this year. Political and economic volatility are likely to create further credit concerns in the Eurozone, which in turn will affect the UK. However such conditions will not only bring threats but also opportunities. Less competition in the market, and the balance of power moving away from sellers, are likely to create interesting market conditions for well informed and discerning property purchasers.

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