The London market, where prices have surged ahead, has seen growth stall with prices flat last month, according to Hometrack’s latest housing survey report.
It means that overall prices in England and Wales have risen by just 0.1% for the second month in a row as the gap between supply and demand has narrowed rapidly and all evidence points to a shift towards a seller’s market in the remainder of the year
Whilst average house prices are yet to fall, weaker demand and increasing supply over the last six months have reduced the upward pressure on house prices, according to Hometrack, and this is increasing the amount of time properties are spending on the market and resulting in sellers having to accept larger discounts to the asking price to achieve a sale.
House price growth across the London market continues to underperform the rest of England and Wales. Growth flat lined once again in August and just 11% of postcodes registered month on month price increase. This compares to prices rising across 19% of markets outside London with the impetus for growth coming from commuter towns across the greater South East.
The change of fortunes for the London market over the last six months has been stark. In February this year 87% of London postcode districts witnessed a price increase over the month compared to just 11% now. The proportion of the asking price achieved has fallen from 98.8% to 96.4%.
Overall demand remains subdued with new buyer numbers down by 0.9% for a second month, largely on seasonal factors while the time on the market is up for the second month in a row from 5.9% in June to 6.3 weeks in August.
The data also shows that the proportion of the asking price achieved is down for the third month in a row from 96.8% in May to 95.9% in August. Price falls tend to be recorded when this measure falls below 94%.
Some 19% of housing markets posted price gains in the month with 4.2% recording price falls. Six months ago price rises were recorded across more than 50% of the market i.e. the coverage of price rises has more than halved over this time.
‘The latest survey continues to point to clear evidence of slowdown, particularly in the London market. This is not a huge surprise for August but the signs of a slowdown in market activity were starting to emerge back in May with evidence of growing resistance to rapid price rises in the London market,’ said Richard Donnell, director of research at Hometrack.
‘Talk of a housing bubble and warning from the Bank of England have impacted sentiment while tougher affordability checks for mortgages and rumblings around interest rate rises is starting to make buyers think twice. Important lead indicators in this survey are turning and pointing to a loss of momentum in house price growth,’ he explained.
‘In particular a widening gap between asking and achieved prices in the face of weaker demand and an increase in the time on the market. Both indicators are coming off a positive base which suggest a slowdown in the rate of growth rather than price falls. We expect a continued shift towards a seller’s market in the face of weaker, more price sensitive demand,’ he added.
The report also shows that demand for housing has increased by 23% in the eight months to August, on a par with growth over 2013 and stronger demand is to be expected as the housing recovery spreads beyond London.
However, compared to 2013, when demand continued to grow month on month over the year, there has been a clear slowdown in the latest three months of 2014. London and the South East are registering an increase in the time on the market which is most marked in London.
At the same time, the time to sell has reduced across all other areas in the last 12 months as market conditions have improved.
