This week there’s been a whisper through the newspapers that the London property market is starting to even out in terms of UK house prices. Is momentum in the central London property market decreasing, or is it in fact a reflection of the buoyant market spreading beyond London and catching up with the capital?
There may very well be indicators that there will be resistance in the future to UK house prices rising, yet evidence clearly reveals that these factors aren’t affecting London as yet – with the capital continuing to register above average growth at 0.8 percent.
Hometrack Ltd, the specialist providers of insight on residential property value, risk and opportunity, have presented research that says values in England and Wales have risen 0.6 percent over April, the same pace as in March. Richard Donnell, their Director of Research, states “The pickup in the coverage of house prices is very clear cut. Improving market sentiment and low mortgage rates are supporting increased activity”.
Yet, at the same time the levels of current growth can’t be sustained forever. So, what characterises these signs of resistance?
Certainly not the fact that supply continues to grow at a slower rate than demand (which is nationally still increasing), more buyers are prepared to pay the asking price on a property than ever, and the pound rising 0.3 percent from April 25th, showing a strengthening of the economy.
However, these house prices are being maintained by the continuing record-low Bank of England interest rate, and with the daunting concept of interest rates increasing, alongside the looming mansion tax and new MMR reforms, families may be anxious about taking on debt. Richard Donnell supports this, stating, “What is less clear is the scale of pent up demand that exists to sustain further house price increases… The willingness of households to take on mortgage debt are the primary factors that will influence the outlook over the medium term”.
The report reveals that the time a property is spending on the market in London has risen from 2.7 weeks to 3.4 weeks. The share of postcodes reporting price gains fell to 66 percent from 76 percent and the proportion of the asking price achieved dropped to 99 percent from 99.3 percent. Arguably, these changes, albeit perhaps seasonal and slight, may indicate that buyers are less willing to bid up the cost of housing at recent rates.
What does this indicate for the large mortgage market? Islay Robinson, CEO of Enness Private Clients, comments “I think this is a natural response to the heat of the market so far this year but I cannot see this being an emerging trend. We are as busy as ever and these slight variations make little difference to the market as a whole. That said – IF this is the top of the London market, those who own here already and are planning to move out of London should act now to realise all of their gains and secure their next property at the best price”.