House prices rose by 4.7% in the year to May according to latest figures produced by the Office for National Statistics (ONS). This is despite many predictions of stagnant or falling prices predicted by various so called experts following the results of the EU referendum. There are of course as always regional variations. Importantly growth slowed in London compared to outside regions. This is very important because changes in trends in the market almost always start in London and is usually a very good indicator of what will happen in the rest of the country.
So what for the coming months? There are already signs that the market is slowing with a fall in the rate of house price inflation from 5.3% in April to 4.7% in May. There are downward pressures on the wider economy with growth falling from a high immediately post the EU referendum, uncertainty in the workplace and a slight air of nervousness. There is a squeeze on real incomes with householders reluctant to make those big ticket purchases. Lenders are predicting they will lend less in the third quarter. This slowdown in prices is amplified if you look at figures from Zoopla (which looks at asking prices and therefore its figures are 6-9 months ahead of the ONS figures which are based on completions and land registry figures). Zoopla reported that the price of the average home increased £3,000 since the start of 2017 compared to £13,852 over the same period the previous year. Coupled with the changes been seen in London this does suggest we will see a slowing in growth over the short term. In some areas of the country house prices have actually fallen with some locations seeing falls as much as 5%.
Does this reflect what we are actually seeing on the ground? At House-Hut we are currently still experiencing huge demand for our properties resulting in our average time to sell being just 10 days with some selling within 24 hours of coming to market. We are finding the market is very price sensitive, a property put on at the right price sells quickly, put on slightly more however and it doesn’t sell at all. It is very important if your property does not get the interest in the first two weeks you evaluate the response carefully and usually it means you will need to reduce to sell. If you delay and reduce later the effect will not be the same and the result is usually you end up selling for a lower price! We are still seeing a significant number of our properties selling for over the asking price – the key is marketing initially at the correct price.
What is driving this demand for property? There are a number of factors driving this demand the primary one being a massive shortage of properties available to sell and rent. This is highlighted in the ONS report which found a slump of 41% in the number of homes sold in the year to March compared to the previous year. In addition interest rates remain at an all time low and lending criteria are relaxed and favourable to borrowers. The shortage has been further fuelled by various government initiatives including help to buy etc which far from helping to solve the housing crisis have actually made matters worse by adding fuel to the fire. The shortage of housing is a long term structural problem and will take years to resolve so for the medium term – house prices are likely to continue their upward spiral.