June is normally a brisk month in the property market, with transactional activity peaking before the summer recess; this year Garrington has observed more sedate but steady levels of activity. In many cases buyers still have the upper hand, yet this is still not being recognised by some sellers, who persist with overzealous pricing strategies.
As we pass through the halfway point of 2012 and consider that the Country has technically re-entered a recession during the last six months and been affected by wider global economic and political volatility, the property market has remained relatively resilient despite being largely stagnant. However, during this period, the UK market has become increasingly complex and the validity of headline national trends is increasingly being diluted when contrasted with previous years.
Over the last month Garrington has achieved double digit price reductions against properties for clients, whilst at the same time has secured properties in competitive bidding situations – one, with five rival bidders. The argument for ensuring a buyer evaluates and understands local market conditions before making a purchase has never looked stronger.
Conflicting house price indices
For the fourth time this year the two main national house price indices disagreed in June as to the direction of the market. Nationwide reported a fall in house prices of 0.6%, which is 1.5% lower than this point last year. However, Halifax reported a 1.0% monthly rise, returning annual prices to a similar level seen in June 2011. The RICS has reported a fall in property stock levels listed by its members by 0.2% in June, a small yet significant figure as it marks the second consecutive month that new stock entering the market has fallen. The RICS also reported that new buyer enquiries edged back last month.
Given the above trends it was surprising to see research data released in June by Rightmove, suggesting that asking prices had risen by 1% in June and by 2.4% compared with 12 months ago.
With statistics such as these emerging, it is easy to become confused about the true picture. To gain a clear and accurate understanding of the market, it is important to consider market segmentation by both location and value. Garrington assist clients across the UK and it is noticeable that certain key hotspots such as Harrogate, Cambridge, Bristol, Sevenoaks and Guildford remain starved of quality prime property stock, and in many cases competition to secure ‘best of breed’ homes can be intense.
London is already well documented as a micro market, and research from ONS released in June further underlines these credentials, showing that annual prices in the Capital were up 4.9%, compared to just 1.4% across the UK over the same period. Prime central London prices led the field and increased again in June for the twentieth consecutive month, representing a 48% growth since spring 2009. A £1 million property acquired in prime central London at this time is now estimated to be worth £1.48 million.
Capital gains aside, the financial logic for home ownership in the UK remains strong with research released in June by Zoopla suggesting that on a pure affordability basis, owning a property instead of renting remains cheaper in 84% of the UK’s top 50 towns and cities, although across the price spectrum access to credit to buy a property remains severely constrained.
Bank of England to support credit markets
The Bank of England and Treasury have announced plans in June to make £100 billion available to banks by way of low cost loans, which then must be allocated to small business and mortgage lending. This latest initiative follows in the footsteps of the programme of quantitative easing which many pundits believe has assisted in averting a contraction in the economy, but nevertheless has failed to stimulate mortgage lending. This focused approach is very clear in its objectives, although only time will tell whether it makes a meaningful difference to the market.
Summer sees the return of accidental landlords
Having seen a surge of sellers retreat to the ‘safety’ of the rental market in late 2009, it has been interesting to see over the last month a noticeable increase in the number of ‘accidental landlords’ now seriously considering their options. HMRC allows a three year CGT exemption window to rent a previous primary residence before a disposal, and with this window closing soon for some owners, the rental market has become a good hunting ground for Garrington recently, with two purchases agreed on properties otherwise earmarked for rental. This further demonstrates that although the market is now entering a traditionally quieter period, interesting buying opportunities still exist for committed purchasers.
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