We reported signs of a slowing in the property market last month, and this national trend has continued in September with Nationwide reporting a monthly fall in house prices of 0.2%. Much attention was focused on the outcome of the Scottish Independence election on 18 September, as a ‘Yes’ vote would have had a major impact on financial markets, with the prospect of an earlier than expected rise in interest rates.
Attention is now switching to the Party Conference season, and the Election promises of both major parties, which in turn could affect market sentiment.
Aligning supply and demand
Hometrack have been reporting reductions in the number of new buyers registering with sales agents in each of the last three months. Last month they also reported zero price growth in house prices for the first time in nineteen months, and that after cooling since May the market has now stalled.
Garrington believe that such sweeping statements are potentially misleading, and whilst there is now evidence of imbalance between buyers and sellers in some parts of the country and indeed price levels, the market has remained busy over the last month, particularly in the prime sector. The ‘balance of power’ however is changing in favour of the buyer, which has led to us achieving some double-digit price reductions from asking prices as a result.
The UK property market continues to be supported by a strongly performing economy – with the Office for National Statistics recently reporting an upward revision to second quarter growth to 0.9%. The ONS figures show that the economy is now 2.7% bigger than its pre-recession peak. The Bank of England is forecasting that growth for the year will be 3.5%.
By contrast the IMF is concerned about falling prices in the Eurozone, and that demand will remain persistently weak in the UK’s biggest export market. With signs of a slowdown in China the OECD has revised downwards its economic growth forecasts for nearly every advanced economy other than the UK.
Given the international background, the slowdown in the housing market, and an absence of inflationary pressures, it seems unlikely that the Bank of England will move to raise interest rates for the time being.
Land Registry figures released last month, to the end of August, record positive house price changes for all regions during the month, with 2.7% for London but only 0.1% for the North West. Within regions there were some negative movements, and parts of Wales and the North of England have yet to show any increase over the last 12 months.
Hometrack reported prices continuing to cool in London and the South East in September, with an increase in time on market and a widening gap between asking and achieved prices. However, at the top end of the market, Garrington continues to see demand from High Net Worth clients, and limited quality stock available. This means that when the best homes come to the market, and are correctly priced, they still typically achieve their asking price.
Elsewhere, after a slower summer period enquiries are now noticeably beginning to pick up in most areas. However the market is price sensitive, and buyers will not chase prices up as they did earlier in the year, but will pay a full price for the right property once they are motivated to move. We are still seeing competition for investment properties in London, Cambridge and the centres of commuter towns.
Given the above factors, we expect a window of opportunity to open for buyers during the autumn, triggered by less competition and more realistic pricing by sellers, leading to buyers being able to secure the right property at good prices.
Fears surrounding the possible introduction of a Mansion Tax, and next year’s General Election results, are also starting to affect some sellers, providing purchasing opportunities, particularly for those who are buying with a long-term ownership horizon and who are comfortable with any changes that may follow the Election.