The usual autumn flurry of activity ahead of the winter slowdown has failed to materialise in any meaningful way this year. Instead, market conditions have remained constrained by a combination of the low supply level of homes for sale and a ‘pause for thought’ as purchasers evaluate whether recent volatility seen in the financial markets could be an early cause for concern in the wider economy; and therefore the property market.
New records and tipping points
Despite reduced activity last month, we saw new records being set for average asking prices according to Rightmove, which recorded the highest ever national average asking price of £296,549. This rise was led by the lower end of the market, with first time buyers and investors competing for stock and driving average asking prices up by 4.9%. By contrast, average asking prices in the prime market edged downwards by a further 0.1% last month.
Land Registry data released last month also recorded an upward movement in prices, and in particular, recorded that the average property value in London had now reached the £500,000 mark, with prices rising by 9.6% year on year. Outside of the capital, the data also revealed that six of the nine regions experienced positive growth, reflecting a trend Garrington has seen this year; of a gradual market recovery across many parts of the UK.
National house price indices from Nationwide and Halifax both recorded an upward movement in property values, with Nationwide recording a 0.6% monthly gain and Halifax a higher still monthly jump of 1.1% in average prices. The ongoing supply and demand imbalance in all but the prime market remains cited as the primary driver for ever spiraling values, with the Royal Institution of Chartered Surveyors recording the eighth successive monthly fall of new instructions for sale amongst its members. Despite there being a lack of property for sale, the Bank of England has reported that mortgage approvals rose by 4% between Q2 and Q3 this year, which is widely seen as a reliable forward indicator of house sales.
Despite rising house price movements, a number of FTSE listed estate agency chains have issued profit warnings in recent weeks, suggesting that the combined effect of stamp duty hikes and affordability issues are now endangering the ongoing vibrancy of the market.
Several investment banks and City forecasters have reacted to both this and wider concerns about the state of the market, and are suggesting that the market may have hit a new peak and that a correction may now follow if we are at such a tipping point.
Whilst the UK mainstream market has enjoyed a strong resurgence this year, the prime market has been left in a subdued state through arguably a ‘perfect storm’ of headwinds affecting buyer behavior at the top of the market. Issues such as the disproportionate increase in Stamp Duty for high value homes, an accumulation of recent tax revisions aimed at high net worth property owners, and a strong pound, have discouraged foreign investors and wealthy buyers from entering the UK market.
A number of sellers are choosing to bide their time in bringing their homes to the market and are waiting to see if the Chancellor reacts to the steep downturn in activity in the prime market with any announcements to policy changes in the Autumn Statement later this month.
For those buyers willing to do the opposite of the crowd, Garrington has been able to agree some very attractive prices for clients over recent months by taking advantage of the current softening of sentiment in the prime market.
The hidden market
Traditionally a number of buyers place their moving plans on hold at this time of year, but in doing so may miss out on some of the most attractive purchasing opportunities seen this year, or indeed fail to get ahead of other buyers who will be looking in 2016.
Across Garrington’s operating regions, we are consistently hearing that sales agents are valuing property which will be launched for sale next year, but sellers might entertain ‘off-market’ viewings now. Over half of the total ‘off-market’ deals that Garrington agreed for clients last year were sourced ‘off-market’ during the winter months and we anticipate a similar trend this year.
Whilst we have come to expect a general slowdown at this time of year, last year’s political intervention and policy changes announced in the Autumn Statement has had a profound effect on shaping market conditions this year and in turn has made this an important date to consider. Accordingly, all eyes will be on the Chancellor on 25th November when we learn of any changes which will affect the housing market. Buyers and sellers can then proceed with a greater level of clarity and confidence.