Last month Garrington reserved judgement as to whether buyers held the balance of power. Nationwide and Rightmove have since reported July monthly house price falls of 0.5% and 0.6% respectively, which would strongly suggest that the prevailing market conditions do now favour buyers. Rightmove has also reported that over 30,000 properties have been coming on to the market each week, representing an increase of 45% compared with last July. This is undoubtedly due in part to the abolition of HIPS, but has changed the previous imbalance between supply and demand in favour of buyers.
National statistics can however be misleading for buyers looking in the prime sector of the market. Primelocation have reported rises of 0.3% for Prime UK and Prime Platinum UK properties in July, with increases in 7 out of 10 regions. They commented that top tier markets reflect cautious optimism and that “activity continues to be robust, witnessing only a slight dip in transactions that can be partly attributed to the seasonal lull that traditionally characterises the Summer months”.
This has also been our own experience. Many more properties have come to the open market recently, possibly due to the removal of the requirement for a HIP. It is not yet clear how serious many of these sellers are. It would also appear that sellers are still being unrealistic in their pricing expectations, and selling agents have commented specifically about this to us and their challenge of “managing sellers’ expectations”. Whilst Garrington has seen continuing interest from potential new buyers in July, and has been able to conclude a number of transactions at discounts to asking prices, buyers remain cautious and in some cases are deferring their decisions to proceed until after the holiday period. We expect market conditions in August to remain relatively subdued, but that September might see an increase in buyer activity.
Positive factors which will continue to support the market are economic growth (which at 1.1% for Q2 was higher than expected and the strongest since early 2006), falling inflation, low interest rates and increased lending now that banks are back in profit and under political pressure to lend. The Bank of England Governor, Mervyn King, has affirmed the view of other economists, in that interest rates will have to stay low for a number of years to underpin economic recovery.
Encouragingly, the Centre of Economics and Business Research has recently forecasted that the UK housing market recovery will now continue through until 2014, as low interest rates and a shortage of supply buoy the market. Commenting on announced price falls in July it said that “the market is correcting for getting ahead of itself at the beginning of the year” and the drop isn’t a “prelude to an even steeper decline”.
We therefore remain optimistic that, over the medium to long term, the market will continue to show positive growth and that current market conditions provide opportunities for negotiating attractive buying prices.
For further information on Garrington contact +44 (0)20 7099 2773 or email firstname.lastname@example.org or visit www.garrington.co.uk