Asking prices rise – sale values fall
The arrival of autumn has brought about mixed fortunes for the UK property market. Whilst transaction activity remains subdued relative to historical seasonal benchmarks, market sentiment and activity has picked up following an unseasonal lull in September.
During October property portal Rightmove announced a surprise national rise in house asking prices of 3.5%, noting particular strength in the upper quartile of the market and in prime central London, where in Kensington and Chelsea asking prices rose in October at an average rate of 9.1%. Nationwide also reported growth in October albeit at a more sedate level, with house prices reportedly rising 0.6% in the month.
By contrast, both Halifax and Hometrack’s house price indices report falling house prices in October, at rates of 0.7% and 0.1% respectively. Conflicting trend data is by no means a new phenomenon in the market, but October’s differing views come at an interesting time when wider economic data appears to change direction.
Health of UK Economy improving
After nine months of prolonged economic contraction, the ONS announced in October that during the last quarter the economy had grown at a rate of 1% – its fastest rate in half a decade, which in turn marked the end of the double dip recession.
Whilst many threats clearly remain, other key indicators support the belief that the economy is improving. The ONS reported in October that inflation had fallen to 2.2% at the end of September – the lowest it has been since November 2009. Unemployment levels were reported in October to have fallen again from 8.1% to 7.9%.
General consumer confidence also appears to be rising, with the CBI reporting that 47% of retailers have recorded higher sales than a year ago. The British Bankers Association also announced last month that mortgage approvals rose in September to their highest level for 5 months; although still lagging behind last year’s approvals.
Prime transaction volumes resilient
Whilst most headlines remain focused on house prices, it is also important to consider the volume of transaction levels as an important indicator when evaluating the state of the market.
At a national level, latest data released in October by the Land Registry records average monthly transaction levels up to the end of July having fallen from just under 55,000 sales on average a month, to a lower average level of 52,309 transactions a month. In contrast however, the number of recorded prime property transactions in excess of £1 million rose by 19% in London and 13% nationally.
The prime market is not without its challenges, but generally has been robust in weathering the storm so far this year, although arguably restricted supply of fresh stock remains a significant factor in influencing onward prices and transaction levels.
The Chancellor’s announcement in October that a ‘mansion tax’ will not be introduced has also brought further good news to the prime market, despite the debate over some form of prime property tax still rumbling on in the corridors of Westminster.
Across our operating areas, Garrington has experienced a rise in agreed transactions during October, both on a monthly and year on year basis. Data from Hometrack also reveals a similar trend in the wider market, reporting a 9.2% increase in transactions agreed, arguably by re-priced older property stock on the market now being at a level where buyers have been willing to commit to a transaction.
Is the market turning a corner?
Clearly one month’s data is insufficient for meaningful conclusions to be drawn, but positive economic indicators and consumer news are much needed by the property market; not only to support current activity, but also to provide the foundations for a sustained (albeit long) market recovery and a stronger finish to 2012.
Looking ahead it is likely to be macroeconomic and political events outside UK shores that could destabilise any sustained recovery. American fiscal debt policy, the success of Eurozone austerity measures and a change of leadership in China all have the potential to individually and collectively determine the vibrancy and shape of global financial, credit, and property markets as we approach the end of the year.
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