Summer traditionally marks the start of a relatively quieter period in the UK property market, but activity in July surpassed seasonal expectations and reinforced the signs of a continued recovery.
A positive outlook for summer
Market data and house price indices for July all indicate further growth in property values and transactions. Land Registry figures show that prices are up 0.6% on the previous month and 0.8% on the same time last year, whilst Nationwide’s data shows an upswing of 0.8% for July, leaving prices a more impressive 3.9% higher than the falling values of the same period last year.
Other market indicators paint a picture of rising confidence, suggesting that there has been a further growth in the percentage of the asking price being paid by buyers and a further reduction in the amount of time a property remains on the market unsold. This is now at its lowest point for six years according to the latest Hometrack figures, as seen in the graph below.
We can also see an ongoing optimism in seller sentiment, with average asking prices up a further 0.3% in July according to Rightmove. It is also important to note that they show all regions demonstrating a year-on-year increase in asking prices for the first time in nearly three years.
Across our UK offices, Garrington has also noted an unseasonal upturn in the prime market, with July marking our busiest month of 2013 for new purchaser enquiries. For our existing clients, we have been able to access new purchasing opportunities and transactions are being agreed on an on-going basis despite the commencement of the summer holiday period.
Land Registry July figures support this trend, which records for its most recent sample month that in the prime (£1M+) price bracket there were 45% more transactions across the UK in 2013 than there were in 2012.
Revised price forecasts
With continued evidence of a sustained housing market recovery a hurried wave of revised house price forecasts were published in July.
A number of prime sales agents have issued significantly increased predictions for 2013 price growth. At the end of 2012, Knight Frank were forecasting a flat market for London in 2013, but in light of current activity they are now indicating a possible 6% increase in values over the year. Savills have also had to revise their forecasts from their previous ‘premature’ predictions of flat growth for 2013, to a 6% rise in London over a twelve month period and 18.1% over the next four years in the UK. Rightmove too has had to rethink its outlook for the year and has doubled its 2013 forecast from 2% to 4% as the positive picture continues.
Garrington concurs that the elements appear to be in place for a wider sustained recovery and price growth, but stress that the market remains value sensitive and polarised by certain regions and price sectors.
Data released in July suggests that the economic fundamentals are improving with unemployment falling and growth being recorded both in the manufacturing and service sectors. Credit markets also appear to be improving with the Council of Mortgage Lenders reporting a 26% rise in approvals compared to this time last year.
The Bank of England’s new Governor, Mark Carney, has also just pledged to hold the Base Rate at the record low of 0.5%, at least until unemployment falls to 7%. The Bank’s own prediction is that this is not likely to happen until 2016.
Despite some recent gains, Sterling is still weak around 10% below the Euro and 3% below the Dollar when compared to its 2012 peak. Garrington anticipates that a combination of a strengthening economy and weaker currency is likely to further drive even more foreign investment into UK and prime central London property.
A recent industry survey of international investors indicated that over three quarters of respondents would be looking to increase their UK property holdings over the next five years. Whilst this is likely to include wealthy private investors from the obvious Asian hubs, a relaxing of relevant legislation in some Far Eastern countries is also likely to mean a surge in new institutional investors.
A more rounded market?
After several months of sustained positive economic and property data, Garrington believes that the property market as a whole is beginning to look healthier. Whilst there will continue to be significantly diverse patterns of behaviour in the various segments of the market, all the signs indicate that the majority of the UK market is beginning to follow the trends set by London and the South East to inch forward on a steadier footing.
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