Political and economic events occurring in June have undoubtedly affected both sentiment and activity in the UK property market.
As we entered June an air of uncertainty descended across the market, with many fearing the emergency budget would have severe ramifications for homeowners and investors alike. Obviously the budget announcements are entirely subjective in their nature depending on each individual’s own situation, but a widely held view is that legislative announcements ‘could have been a lot worse’. Of particular note was the announcement that capital gains tax was to increase with immediate effect to 28% for higher rate tax payers – much lower than the feared 40-50% rate some commentators had predicted.
We commented last month that, following the abolishment of HIPS, we were noticing an upswing in property entering the market. During the last month we have seen this trend become more pronounced across our operating areas, particularly in the country house and central London market, where sellers seem to have delayed placing their homes for sale in May due to the Election. Arguably these sellers may have also been further spurred into action this year ahead of the introduction of a 5% stamp duty threshold next year. Quantitative data from property portal Rightmove supports these observations, with new listings having risen from 27,235 in May to 33,149 in June, and up 56% compared with June 2009.
House price indices from Halifax and Nationwide reported contrasting house price movements in June. Halifax stated that house prices had fallen in June by 0.6% compared to May. Nationwide, by contrast, reported that prices rose by 0.5% in June from May’s figures. Both indices show that the rate of annual price growth is faltering, with Halifax now stating that the annual rise is 6.3% and Nationwide stating that prices are 8.7% higher than a year ago. Economists from both companies are predicting that we could see near flat price growth by year end.
At the top of the market, prices continue to be robust in June, with data from Prime Location’s Prime and Prime Platinum stock indices showing monthly price rises of 1% and 1.1% respectively, with annual growth at 4.1%. In addition to openly available stock, Garrington has continued to see a rise in off-market opportunities in the prime market; indeed in June 80% of the properties acquired for our clients were purchased either off or pre market. With more property being made available for sale, and arguably the market in a state of transition, Garrington has noticed some sellers pre-emptively reducing asking prices as competition to find buyers increases.
Whilst the risk of a ‘double dip’ recession remains, some commentators are predicting that interest rates are likely to remain at 0.5% at least until the end of this year, which will underpin existing purchaser demand in the market.
Garrington will continue to evaluate the dynamics of the market over the Summer before judging whether the balance of power is moving in favour of buyers again.
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