The beginning of September normally follows more sedate market conditions over the summer, however purchaser demand has remained strong despite the number of new sellers entering the market remaining constrained.
National house price indices once again reported further rises in house prices over the last month. Halifax recorded an eye watering jump in monthly values of 2.7%, which is the highest recorded monthly gain since May 2014. Recorded prices in the three months to August are now some 9% higher than they were 12 months ago. Nationwide also recorded a further rise in monthly prices, but at a more modest 0.3%, and giving an annual rate of price growth of 3.2%. Data published by the Land Registry in August shows a monthly price increase of 1.7% for its latest reporting period and annual growth of 4.6%.
Perception and reality
Whilst all of the above price data would suggest healthy market conditions, being driven by revived purchaser demand, these headline price rises are in fact masking an emerging trend of the market losing traction due to a lack of choice, affordability, confidence and the wider economic background.
In recent years the media has arguably become over obsessive surrounding the direction of price movements, but really it is the volume of recorded transactions which offers a more reliable measure as to the state of the market.
Recorded sales volumes in England and Wales have fallen by 15% in the latest reporting period to May 2015 released by Land Registry, which recorded 65,619 home sales. That is less than half the number of homes that were changing hands every month during the boom years; at the peak of the market in November 2006, 202,000 properties were sold. The fall in sales has occurred across all sectors. In prime central London for example, the number of sales has plunged by a fifth over the past year.
The latest survey from RICS confirms that their members have the lowest level of property available for sale ever seen, based on data extending back to the 1970’s. This shortage of established homes is the root cause of both prices spiralling in the mainstream market and the recent fall in transaction volumes.
Prime time to buy?
Despite national average prices increasing, the prime market has de-coupled and activity levels are more subdued in many areas. Transaction volumes have fallen by 21% in the prime market (over £1 million) as compared to a 15% fall in the mainstream market.
The prime market is still reeling from the rise in the top rate of Stamp Duty, recent changes to credit availability and a noticeable absence of international buyers in the market – a group of buyers which previously had been one of the driving forces for sharp price rises in London and the South East.
The compound effect of these factors is price volatility and incredibly polarised market conditions. In rural locations Garrington has seen higher levels of stock and noticeable price reductions so far this year. However, in prime towns and cities such as Harrogate, Bristol and Cambridge the choice of available property is still very low and competition between prime buyers is very intense for ‘best of breed’ homes. In Cambridge for example the volume of recorded house sales over £2 million has fallen by 75% year on year.
London is equally difficult to rationalise at the present time. Average asking prices fell by 6.2% last month in Kensington and Chelsea, but increased by 4.5% in the City of Westminster according to Rightmove data.
For the right property with the right postcode demand is still strong in London. At the recent release of the next phase of the prestigious Southbank Place development, over 250 buyers queued and competed to place reservations to own a property in the former Shell Tower.
Overall there appears to be a ‘window of opportunity’ in the prime market to take advantage of less competition, increased flexibility on sale values and to lock in to historically low interest rates, which look set to increase at some stage in 2016.
The recent slump in financial and commodity markets around the world might affect the UK economy and in turn sentiment in the property market, but the potential impact has been played down by the Governor of the Bank of England.Over the coming months it is likely that we will continue to see upward price movements until such time as the supply of property for sale starts to become more free flowing. For all their enthusiasm though, buyers remain astute and sellers must be wary of letting their pricing ambitions run away from what the market will tolerate.
In such times of change, fully understanding the complex nuances of local markets has become more important than ever, and taking time to obtain the right expert guidance is likely to be the key to a successful move as we approach autumn.