As we approach winter, the property market in November gave out some unexpected signals, indicating that whilst sectors of the market are recovering it remains fragile.
National house price data recorded last month suggests more subdued market conditions, with Nationwide reporting that prices remained unchanged in November, whilst Hometrack’s data suggests that national prices have fallen for the third month in a row by 0.1%. Hometrack also reported a surprise fall in London values of 0.2% – the first drop in the Capital for nearly a year.
Whilst house price data made gloomy reading, activity in the market has been brisk for this time of the year. During November the RICS reported that its members had recorded the largest rise in new buyer enquiries for three years, which is believed to have been spurred on by improving mortgage rates and positive market sentiment in October.
Bank of England data released in November also revealed a 9.2% upturn in mortgage approvals over the last quarter, further underlining support for the market after the September lull.
Property portal Rightmove also announced unseasonal activity last month, citing search activity from buyers increasing by 20% and enquiries rising by 11%. In addition to this, Rightmove also reported asking prices rising by 2% year on year – the highest rate recorded in the month of November since 2007.
The urban/rural divide
Latest data from Hometrack suggests that the north/south property divide narrowed last month. As illustrated in the table below, the gap between asking prices and achieved prices is closing in northern regions; in turn reducing downward pressure on values. Activity in Garrington’s Harrogate and Knutsford offices support these trends, with revised asking prices now starting to entice buyers.
Independent of any north/south property divide, outside of London, Garrington has observed a growing and more profound divide between micro markets in ‘uber’ commuter towns, cities and rural markets.
Restricted supply and healthy demand for prime properties in locations such as York, Oxford, Guildford and Cambridge are being driven by buyers seeking excellent schooling, quick transport connections and a better quality of life. In such locations Garrington is still seeing strong levels of ‘off market’ activity, and in some cases best and final bidding.
London cooling or falling?
The report by Hometrack that values have fallen in the Capital will come as a surprise to many, especially given the recent performance of the market. Prices for most of 2012 have continued to defy gravity, and their relentless rise is the main reason why the national average has been positive in the past year.
The London market is in essence a series of geographic and financial micro markets, each with their own characteristics. At the very top of the market there is strong evidence that activity has slowed down in recent months in the Super Prime sector, as buyers and sellers alike take stock of recent tax reforms and eagerly await further clarity from The Treasury regarding annual charges and capital gains tax on properties worth in excess of £2m owned by companies. The responses to The Treasury’s consultation are due to be published on 11th December and are likely to become law in April 2013. This could have a noticeable effect on the Super Prime market in the first quarter of next year.
Activity in the £1m to £2m price sector remains relatively strong, largely due to a continued supply and demand imbalance. Economic activity in London supporting this part of the market also remains strong, with the City of London Corporation and Oxford Economics reporting a 3.2% year on year growth in city jobs.
In our opinion the market cooled slightly last month, with buyers in London remaining cautious and price sensitive, although they remain committed to property ownership in the capital.
Key economic fundamentals such as falling unemployment, increasing bank liquidity and availability of mortgages continue to offer hope for a sustained housing market recovery. However the time horizon for a full market recovery is increasingly likely to be measured in years rather than months.
Activity in the market at this time of year traditionally slows down. However as we approach the end of this year, property appears to have remained a focus for many buyers keen to secure a property at the right price.
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