At long last, summer seems to have arrived with some much needed sunshine as Olympic fever sweeps the nation.
Many of the national house price indices have reported house prices falling in July, all by varying degrees. Nationwide yet again lead the trend and report prices to have fallen by 0.7%, whilst Hometrack suggest a more modest fall of 0.1% for the month.
Significantly all price indices are reporting that the rate of house price growth in London and the South East and in the prime sector of the market are showing signs of slowing, albeit both remain in positive territory.
At this stage it is too early to judge whether this is a seasonal blip and linked to activities such as The Jubilee celebrations and the Olympics, or deeper rooted in waning purchaser confidence, set against deteriorating UK economic data and euro zone influences.
Prices fall, yet pre-Olympic flurry of activity
As schools break up for the holiday season, market activity in July normally starts to slow down. However, July has been unexpectedly brisk at Garrington, witnessing high levels of new clients retaining us for new searches, and also new purchases being agreed for existing clients. This trend has been seen both in the prime regional markets and the London market, but in all cases has been for the very best property which has been correctly priced.
Podium finishes for Olympic landlords?
There had been widespread speculation as to whether the Olympics represented a lucrative opportunity for landlords. In pursuit of the ‘pot of gold’ at the end of the Olympic rainbow, many opportunistic London landlords served notice on tenants, hoping instead to attract high paying short term tenants for the Olympics. This decision may turn out to be short sighted for some landlords, given the additional recorded rent on a typical 2 bedroom flat has only averaged £500 a month, which after letting fees, tax and expenses has not looked like a stunning return. London letting agents are forecasting that in some areas such as Limehouse, Stratford, Canary Wharf and Tower Bridge rent levels could fall in the short term by as much as 15% after the Olympics.
As with any market, scarcity creates value and the congruence of the very best accommodation and the highest paying tenant has led to a world record of a different kind being broken in July, with an Olympic London rental property being reportedly let for £115,000 per week in Covent Garden.
Property transaction volumes rise
Data released in July by HMRC records that the total volume of property transactions completed in the first 6 months of 2012 has risen by 11% to 431,000 transactions. Given the state of the economy this data is encouraging, although on closer evaluation most of the growth in transaction volumes came in the first quarter of the year, when market conditions were brisk and purchaser demand outstripped supply in many areas.
Prime market outperforms national trend
Research reported by our London search team reveals that average prices per square foot in prime central London in the first half of 2012 are now in excess of £1,340, an increase of 12.5% on the same period in 2011. There has also been a 28% increase in transactions and a 42% increase in sales over £5 million, which in the last quarter equated to more than 100 transactions of £5 million plus, and for only the fourth time in the past five years transaction values exceeded £1 billion in a quarter.
The shape of things to come
Accurately forecasting future market trends has become increasingly complex due to the various regional nuances and wider economic events that now quickly affect buyer sentiment. As seen in the tables below, new sellers entering the market are outnumbering transacting buyers by a ratio of nearly 2:1, with final transaction values only averaging 93.1% of asking prices. According to Hometrack, the average time for a property to be on the market increased in July for a second consecutive month, and now stands at 9.5 weeks.
Given this growing body of data, it is reasonable to suggest that we are likely to see further price reductions over the summer months, other than for ‘best of breed’ properties, to entice buyers, who it would seem are likely to maintain the upper hand for some time to come.
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