Number of properties on sale in England and Wales reaches new low
The total number of properties for sale in England and Wales has hit a new post economic crisis low with new data showing supply is down 55% compared to November 2007.
Meanwhile, asking prices in England and Wales have risen a further 0.4% since last month, taking the annual rise to 5.7%, the latest figures from Home.co.uk, taking the average price to £247,137, an all time high.
The report says that home price inflation is mainly driven by prices in London and surrounding regions. Prices in the capital rose 1.8% last month alone and now stand 13.5% higher than 12 months ago.
Weaker regional housing markets such as the North East, the West Midlands, Yorkshire and Scotland all recorded price deflation since last month, down an average of 0.4%. Other areas of the UK recorded stagnant prices or marginal gains at best.
But it is the imbalance of supply and demand that could cause concern. Surging demand, chiefly in London and its surrounding regions, has pushed the mix adjusted average price for England and Wales to a new all time high despite the fact that the weaker housing markets all witnessed a seasonal dip in prices.
Price growth in London’s housing market continues to soar at an alarming rate, the firm suggests, adding that this is just one of the hallmarks of an asset price bubble.
Things could slow down in the run up to the festive season. The typical time on market normally begins to rise at this time of year. The median figure for England and Wales now stands at 120 days, four days less than in November 2012. However, the typical time on market for Greater London actually fell one day to 74 days.
The total stock of the sales market has fallen by 7.9% since last month to stand at 518,556, some 55 % lower than in November 2007. Whilst a small drop in on-market stock may be expected as vendors await the new year, the magnitude of the fall means that we are currently witnessing the lowest level of choice for potential buyers since the housing crisis of 2007/2008.
With demand outstripping supply, sensibly priced properties are being snapped up by desperate buyers but they are not being replaced with sufficient new stock. The supply of fresh property stock fell across the UK last month but the demand supply imbalance remains most prevalent in London, the East and the South East of England where supply, compared to October 2012, is down 30.5%, 20.7% and 19.5% respectively.
The corollary of increasing demand in the face of dwindling supply is a price spiral. The mix-adjusted average for England and Wales, at £247,137, has now eclipsed the previous record set in 2007 and the annualised rate of increase, currently 5.7%, is accelerating.
The report points out that over the last five years, the price of homes has fallen by an average 0.4% between October and November. However, this month it is the opposite with a rise of 0.4%.
In most regions, the market is already showing signs of the seasonal slowdown although the true picture is concealed by the astronomical performance of the London market. If we take London and the South East out of the equation then this month's 0.4% rise across England and Wales would be effectively muted.
However, more of the regions are showing annual price growth as the recovery spreads further afield. Only Scotland and the North East are currently recording a year on year fall in prices at 1.4% and 0.8% respectively. Of the growth areas, only the North West and Yorkshire have experienced price rises under 1% whilst four of the English regions are recording annual price growth of 4% or greater.
In London the average price of a house in the region now stands at £407,354. Prices in the capital have risen over 8.3% in the last six months alone and are now 18.9% higher than five years ago. Dwindling supply of new stock is a key price driver. The flow of new sales stock into London's market last month was down 30.5% compared with the same period last year, inevitably placing further upward pressure on prices.
‘Potential buyers, especially those in London and the South East, are set for more frustration for the rest of 2013 and into 2014. Their choice of properties to consider is the lowest it has been since 2007 and there are no signs of possible improvement,’ said Doug Shephard, director at Home.co.uk.
‘The flip side for vendors is, of course, more positive. The low volumes of property that do make it to the market are in higher demand, and the typical time on market is four days shorter than this time last year,’ he explained.
He pointed out that the situation is compounded as the seasonal slowdown takes hold and, in general, a cooling of prices. ‘These fluctuations are somewhat hidden by the fact that the London market seems to be playing by a different set of rules,’ he added.
Given the capital's recent price performance we expected another rise in prices, albeit a more subdued one. However, a leap of 1.8% in a month is phenomenal and elevates our concerns that London property is becoming a potentially catastrophic asset price bubble inflated by both government backed lending and foreign investment,’ he concluded.